Cash back credit card

Just two years ago, only a handful of credit card issuers offered credit cards t hat gave rebates on purchases. Now three car rebate cards alone-from Ford, General Motors and Volksw agen-award a respectable 5 percent discount toward a new car or truck. BP, Shell and Unocal have teamed up with banks to offer "cobranded" cards, as the industry calls credit cards jointl y sponsored by a bank and a nonbank company, that confer rebates on gasoline purchases. Telephone calling cards from Ameritech, GTE and U S West give rebates. Retailers such as Apple Computer, Nordstrom and the Sharper Image have come on board. Harvest Foods and Kroger are among a g rowing number of supermarket chains that help shrink the family food bill.

Until recently, most rebate cards awarded users with discounts or credits on products. Not so the latest crop of Visa and MasterCards, which offer cash back or the equivalent , such as a savings bond. They join the Discover card, the first to dangle a cash-back bonus in 1986. The NationsBank START card, for example, puts cash into an annuity; Mellon Bank's Co rnerStone MasterCard repays a portion of the finance charges. Mellon's card was introduced earlier this year; the START card, last year. "You are not locked into a GM or Ford car or fl ying on American Airlines," says Ruth Susswein, executive director of Bankcard Holders o f America, a consumer group in McLean, Va.

What could be simpler, what more appealing, than cash back or a discount? But rebate cards benefit people who wield their plastic far more spiritedly than most. For exampl e, the $140 maximum rebate from the GE Rewards MasterCard, which recently added a cash-back feature, calls for charging $10,000 a year-nearly five times the national average. Heavyh anded users should pay off their monthly bills in full to keep interest charges from canceli ng out rebate dollars.

Not even these prudent "convenience users," as pay-in-full cardholders are ca lled in the trade, will get rich off rebates, but the money back can add up. Some of the newer card s, however, impose conditions that can slow the flow of cash into the kitty.

Take the Chase CashBuilder Visa, which debuted in May. (A full description of this and other national rebate cards appears below.) It gives a 1 percent cash rebate on purcha ses plus a rebate that is equal to 10 percent of the monthly finance charge. But the rebate goes o nly to cardholders who charge $200 or more a month. And cardholders won't get a rebate check until their account reaches $500 or after three years, whichever comes first. (By contrast, the Nati onsBank START card will send cardholders a check yearly or even quarterly.)

Rewarding people who carry a balance, as the Chase card does by rebating part of the interest charge, furrows the brows of some students of consumer spending. "There is an in centive not to pay off your outstanding balance," says Ken McEldowney of Consumer Action, a San Francisco group that tracks credit card pricing. Sandra Shaber, a consumer economist with the WEFA Group, an economic consulting firm in Bala-Cynwyd, Pa., sees how cardholders wit h money problems might try to justify using such a card, because the rebate offsets some of the interest charges. But she doesn't think the trend will generally inspire debt. "Most peop le understand it will cost them more money one way or another when they carry more of a balance," she says. Targeted users are people who carry balances occasionally, for big-ticket items or seasonal shopping, says John Ward, a Chase executive vice president. "I don't think this product is ideal for people who are permanently in debt."

Inveterate shoppers might gravitate toward the recently revamped GE Rewards M asterCard. Introduced two years ago, the card used to confer "reward checks," good at major retailers, of $10 for each $500 in charges. Now cardholders get cash back-.5 percent of the fi rst $2,000 in purchases, 1 percent for the next $2,000, 1.5 percent for the next $2,000 and 2 percent for the next $4,000. (There's no rebate on annual purchases above $10,000.) Big spenders could earn $140 a year in rebates. Smaller fry will get crumbs-$5 on $1,000 in yearly charg es, for instance. Still, the Rewards card is more lucrative than the Discover card, which offers $ 85 back a year on $10,000 of purchases. And GE still gives discount coupons of up to 40 percent of f products and services from retailers like Hertz, LensCrafters and the Sports Authority.

Boomers saving for their children's college costs might consider the new Edva nce MasterCard, which awards a $50 series EE U.S. savings bond for every $2,500 in charges. The bonds accrue interest at a 4 percent annual rate if redeemed within five years. After that, a market-based, variable rate (currently 4.7 percent, with a floor of 4 percent) kicks in. Or th ey can be cashed in after six months, at a value of $25.50 at today's rates.

The frenzied introduction of so many credit cards in a saturated market has s parked a quick battle for survival. Fidelity Investments, the mutual fund giant, which rolled o ut a Visa and MasterCard in May that offers a rebate good for mutual fund shares, bowed out la st week. The card's rebate-equal to 1 percent of purchases-was put into a savings account unt il the total reached $1,000, at which point it was invested in two Fidelity funds.

The plan drew criticism for imposing a $2 monthly fee on balances of $500 or less and for taking almost a decade to attain the $1,000 threshold unless cardholders supplem ented their savings with additional deposits. "The reaction and response to the card was not what we had wanted," says Karen Ernst, a Fidelity vice president. The current cardholders wi ll continue to receive the rebate. "There will be others that will pack it in," says Robert McK inley, president of RAM Research, a credit card research firm in Frederick, Md. It only goes to prov e, he stresses, that "there are no guarantees" when it comes to credit cards-on interest rates, fees or rebates.

On the flip side, the manic rollout of a number of rebate cards within a brie f period has pushed rebates into more hands and sparked creativity. Last week Visa announced the cre ation of its new "Visa Rewards" program. During the first segment, from October 1 through Decembe r 31, cardholders will earn points equal to 10 percent of every purchase made on a Vis a card, no matter the issuer. The credits will be exchanged for discounts at hotels (Marriott is e xpected to participate) and other travel-related companies. The specific deals and companie s are expected to be announced this week. Visa plans a similar frequent-user program next summer, with discounts good at national restaurant chains.

Rebate cards targeted to specific niches are another wrinkle. Last month, Sou thern Living magazine rolled out a cobranded Visa to subscribers. Cardholders get a 10 percen t discount on automatic renewals, which must be charged to the card, and deals on various rela ted publications, such as Cooking Light and the magazine's travel packages and house plans. Charle s Schwab & Co., the discount brokerage, introduced a Visa in May that gives credits good to ward investment information like the Value Line Mutual Fund Survey and Barron's.

Rebate reading. For a broad survey of rebate deals, RAM Research's $12 "Rebat e Card Report" lists details on more than 30 cards-some available only in certain areas, such a s the California Advantage card that gives a 5 percent rebate toward the cost of a Wells Fargo mo rtgage. RAM also includes tips on how to choose a rebate card. (Write Rebate Card Report, Bo x 1700, Frederick, MD 21702.) Bankcard Holders of America's $5 report on major rebate an d frequent flyer cards also includes guidelines on how to choose, as well as an analysis of the cost of rebates. (Write BHA at 524 Branch Drive, Salem, VA 24153.)

Those with a wait-and-see attitude risk marketing overload. Amoco is testing a card similar to the Shell rebate card. Chrysler is considering a car rebate card, too. Bally Ent ertainment, the fitness center and casino giant, is testing a Visa that offers a 5 percent rebat e toward resort vacations, sporting events and fitness equipment. Another benefit of exercise: m ore muscle for credit users.