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Credit-card marketers, faced with creeping interest rates and cutthroat competition, are stepping up their use of reward schemes to keep cardholders loyal.

But the often confusing array of rebates, discounts and other incentives threatens to muddy brand identity in the category.

Visa USA last week unveiled Visa Rewards, the card's first attempt to offer retail discounts and savings on travel to big-spending cardholders. A teaser ad ran Sept. 3, with the rest of the radio and network TV campaign from BBDO Worldwide, New York, starting Sept. 26.

The effort will be a major part of Visa's fall ad schedule, with all future promotions grouped under the Rewards umbrella.

Visa's ploy mimics some elements of MasterCard International's successful MasterValues, a twice-yearly coupon promotion begun in 1990 that's now adding several new elements, including offers for factory outlets and catalogs.

MasterCard also plans a network TV campaign through Ammirati & Puris/Lintas, beginning in mid-November. Two free standing inserts are planned from Bates Dryden & Petisi, Westport, Conn., in Sunday newspapers on Oct. 30 and Nov. 27.

Meanwhile, American Express Co. has tested reward-based programs for its basic and Optima card, and Dean Witter, Discover & Co.'s entire marketing premise the Discover card is based on a "cash-back rebate" of purchases.

Several card issuers have rewards of their own, ranging from airline miles and discounts on cars or gasoline to retirement annuities and finance-charge refunds.

"The industry has evolved [to] where added value as part of the product is expected," said Mava Heffler, VP-promotions at MasterCard. "It's no longer a bonus."

Others say the pressure to offer deals has intensified now that the prime lending rate, on which most finance charges are calculated, has steadily crept upward. Nearly 70% of all cards now use variable rates, compared with just 35% three years ago.

"If the rate goes up, they have to justify it through increased value," said Robert McKinley, president of RAM Research Corp., Frederick, Md.

Still, that value doesn't come cheap: Banks must "buy" mileage and other rewards from partners, even as many have eliminated annual fees. Many have traded the hefty profits they once enjoyed for protection of their market share, but even that has its limits.

Leading card issuer Citibank dropped its Citidollars merchandise offer, effective this month, and instead is pushing cobranded cards offering discounts on Ford cars and Apple computers and mileage on American Airlines.

(The bank this month also put up for review its $60 million credit-card advertising account, which has been at Lowe & Partners/SMS, New York, since 1980).

The AT&T Universal Card, which began the cobranding trend by offering 10% discounts on long-distance calls, was forced to up the ante with "Something Extra," a range of merchandise and travel discounts based on monthly outstanding balances.

And General Electric Co.'s 2-year-old GE Rewards fizzled, leading the company to drop its $25 annual fee and a complicated formula for issuing retail discount certificates. Instead, it copied Discover's cash-back rebate and is preparing to begin its first aggressive ad effort, estimated at $10 million, from new agency Berlin Wright Cameron.

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