US assault on credit card market looms

MORGAN STANLEY Dean Witter, the American financial services giant, yesterday upped the stakes in Britain's increasingly crowded credit card market with the launch of its first credit card outside the United States.

The company, better known in the City of London for its hard-driving and successful merchant banking arm, will launch itself on to the consumer finance stage next month.

The credit card will charge no annual fee, carry an interest rate of around 16 per cent on outstanding balances and will offer consumers pounds 1 cash back on every pounds 100 worth of goods bought on the card.

But the move met with a lukewarm response from independent financial advisers, who said consumers would need to be offered better terms and conditions to abandon their current cards.

The card, which will adopt the Mastercard brand, will be backed by a multi-million pound marketing campaign which aims to take market share away from market leader Barclaycard.

Morgan Stanley will be creating up to 1,000 jobs at a call centre in Cumbernauld, Scotland, to manage the customer service for the card, which it hopes will emulate its successful Discover credit card product in America.

The Discover card, started 13 years ago by Dean Witter when it was part of the Sears Roebuck retail empire, was initially poorly received by consumers. Rather than relying on the established Visa or Mastercard networks, Discover opted to set up its own merchant network, with the result that acceptance of the card was patchy.

But the company persisted and the combination of low interest rates and cashback has paid off, with 47 million cards in circulation in the US.

With its British card the company hopes to build an effective brand in a market seen to be "ideal" for new credit card products. "The Morgan Stanley Dean Witter card represents our first credit card issued outside the US and will help build the global Morgan Stanley Dean Witter brand," said David Nelms, president of Discover Financial Services.

"We think we have created a product which will attract a large number of customers," said a Morgan Stanley Dean Witter spokesman.

British consumers can choose from 68 different credit cards, with most now offering no annual fees and extras such as Air Miles or discounts on shopping. Capital One Bank and Northern Rock both offer cards charging interest rates of 11.9 per cent.

The market leader Barclaycard still charges a pounds 10 annual fee and interest on purchases is charged at 18.9 per cent.