Easy Go

A socially irresponsible act to induce people to get deeper in debt. --Excerpt from a talk at a Chicago church

Charge a tithe--Use your BankAmericard. --Sign outside a San Francisco church

That wide divergence between churches last week was prompted by the same phenomenon: the fast-spreading use of bank credit cards, which have become the hottest topic of debate and a source of frenetic competition among U.S. bankers. During the past twelve months, estimates the Federal Reserve Board, more than 1,000 banks have moved into the field. "We're on a creditcard binge," says Executive Vice President Paul Welch of Atlanta's Citizens & Southern National Bank. And most bankers agree that neither banking nor business will ever be the same.

Mortuaries & Teeny-Boppers. Though basically kin to such familiar cards as American Express and Diners Club, bank credit cards aim more at the ordinary needs of middle-income families than at travel and expense-account entertainment by executives. In a few cities, doctors, dentists and veterinarians already accept bank cards; in Chicago, several mortuaries and ambulance services have signed up, and at the city's Cheetah Twistadrome Boutique, teeny-boppers allowed access to their parents' cards can even charge their miniskirts and papier-mache earrings.

Most bank cards cost consumers nothing--provided they pay their bills at the bank within 30 days. After that, the banks usually collect a highly profitable 1 1/2%-a-month interest on the balance. Merchants who agree to honor the cards usually pay a 5% discount to exchange their charge slips for cash from the banks (v. up to 7% through American Express). In parts of the Midwest, competition has driven the rate down to 3%, but even that is not quite low enough to attract major retailers, who have a heavy investment in their own credit setups. President M. E. Arnett of Los Angeles' Bullock's Magnin suggests that at a 2 1/2% discount department stores might well join up. Meantime, bank cards are helping many small shopkeepers to lift their sales--to the discomfiture of their competitors.

"Absolutely Wild." The obvious goal for any ambitious bank or bank group is to span the U.S. with a single credit-card system. With computers keeping the bookkeeping cost within bounds, local banks would reimburse local merchants, then pass their bills on to the cardholders' own banks for collection. In the race to go transcontinental, the giant Bank of America has grabbed an early lead. Last year it began licensing banks outside its California domain to use its highly successful (2,057,000 members, $228 million annual billings) BankAmericard. Fifteen banks have signed up, adding 1,500,000 cardholders and 30,000 retailers to the system.

Battling BankAmericard at home, 62 California banks have formed the California Bankcard Association to start a joint credit-card plan in July; they hope to begin business with 60,000 retailers and 2,000,000 families. The combine has arranged to go nationwide by linking up with Interbank Card, a clearing house of eight big banks that issue local charge cards (among them: Buffalo's Marine Midland, Pittsburgh's Mellon National, Phoenix's Valley National). "It's absolutely wild," says Vice President Glenhall E. Taylor Jr. of San Francisco's Wells Fargo Bank.

Another frenzied scramble for customers broke out late last year in Chicago when five banks organized the Midwest Bank Card System. By last week that regional system had expanded to more than 13 card-issuing banks in Illinois, Indiana, Michigan, Wisconsin and Kentucky, with 60,000 retailers honoring cards held by 6,000,000 families. "Three things have come together," explains Marketing Director Jack Whittle of Chicago's Continental Illinois Bank, one of the interchange system's founders. "Banks are expanding their traditional role in granting credit; they are using computers; and they are dealing with a charge-all society that is ready to use a standardized credit card."

Transactions on a Tape. Most bankers agree that the proliferation of credit cards is moving the nation inexorably toward a cashless and checkless era based on computerized banking. In that society, businessmen would transmit everyone's bills by wire directly into a giant computer network. Debts would be paid by electronic transfer of money from one account to another. "Coins will remain, but mainly for carfare, sales taxes and penny-ante transactions," predicts Governor George Mitchell of the Federal Reserve Board. "It's technologically possible now," notes Vice President Edward Bontems of Los Angeles' United California Bank. "The problem is: Will people want it?"

To find out, Wilmington's Bank of Delaware is testing an electronic credit card with the help of A.T. & T., IBM, some 200 depositors and Storm's Shoe Stores (three outlets). When a customer buys a pair of shoes, the clerk slips his card into a touch-tone phone, dials the bank and automatically records the sale. The bank's computer debits the buyer and credits the store--or, if the customer desires, makes the transfer later. New York's Irving Trust and Detroit's Manufacturers National have ordered similar equipment for electronic cash transfers among businessmen.

Bankers are already looking toward the day when most companies will put payrolls on a reel of computer tape that will be sent to the bank. (A few firms in California do so now.) The bank's computers will automatically credit each employee with his pay, deduct all his recurring bills and credit the deductions to the proper account. It may also be programmed to invest his surplus money in interest-earning bonds. No longer will payday mean long waits before tellers'windows and the tedium of paying monthly bills. Businessmen face still more sweeping changes. Conventional credit-card firms may have to merge to survive; the Post Office's mail load will be lightened by millions of unsent bills and payments.

"We will have local check!ess experiments in the early 1970s," predicts Vice President Herbert Schwartz of Manhattan's First National City Bank, "and tie into a national system in the mid-'70s--much as local telegraph companies connected countrywide a century ago. I visualize an annual statement with interest payments, amortization of the home, taxes paid, insurance--all ready to present to the tax people."

Some bankers dispute Schwartz's optimistic timetable, but James S. Duesenberry of the White House Council of Economic Advisers insists: "This electronic transfer of money has to come because of the terrific load of paper and mechanical transfer that's beginning to clog the banking system." What the bankers are saying, in short, is that people will get more out of their money if they hardly ever see it at all.

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