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Now, Instant Credit Is Just a Click Away Credit-card companies are signing up customers on the fly. To get approved, though, you have to be in the lucky 15% No matter who you listen to, it's clear that spending by online shoppers this holiday season will far exceed last year's $3.1 billion. One other thing is certain as well: Whether this year's total reaches the $4 billion projected by Forrester Research, the $6 billion Jupiter Communications expects, or the $12 billion to $15 billion Ernst & Young guesstimates, just about every purchase will be made with a credit card. Anyone who has ever had one of those has a keen appreciation for the myriad ways in which credit card companies try to get you to borrow and buy. The latest of these is called instant credit: "Step right into our cybermall, folks, and we'll give you $250 to spend. That's right: $250, plus the chance to sign up for a genuine credit card, and all you have to do is ask. The last guy who got a deal this good was Donald Trump. So whaddya say?" Well, the pitch isn't quite that blatant. But on more and more sites this holiday season you can get "instant" credit for modest amounts in anywhere from 30 seconds to 5 minutes -- less time, than it takes to do the same thing at a real store's checkout counter. While you wait, you're likely to be plied with special card offers just for Internet consumers. For instance, Providian peddles something called the Aria VISA Platinum Premium card with fixed rates as low as 7.9% and no annual fee, while NextCard features a program that lets you earn a free airline ticket for charging $12,000, vs. the industry average of $25,000. NASCENT TREND. Chase, Citibank, and BankOne Corp. (through its First USA eCard and NextCard) are three of the big names that have started offering instant credit on the Web. The trend "is nascent now," notes Christoper Musto, a senior analyst with Gomez Advisors in Lincoln, Mass. "It’s a novelty and a marketing tool," adds Rob McKinley, CEO of CardWeb.com, a Web newsletter published in Frederick, Md. Even so, card issuers are hoping that it'll become big one day. "We project that instant credit will become very common over time, in particular in building relationships with merchants," declares Richard Goebel, vice-president for business development at NextCard, the San Francisco company that recently issued a co-branded credit card with Amazon.com. There is a minor catch, of course: Instant credit isn't available to everyone. The Nilson Report, a credit-card industry newsletter based in Oxnard, Calif., estimates that only about 15% of the people who apply for instant credit online qualify. Credit-card companies can make quick judgments because of increasingly sophisticated database technology, now tied into the Web, that can qualify a customer in just a few seconds. The same technology can also determine if you have a previous delinquency, a high balance-to-credit-line ratio, too much available credit, or an insufficient credit history -- all reasons, according to CardWeb.com, why a person might be denied instant credit. JUST A NUMBER. A recent example of instant credit is a Web-only offering from Citibank, one of the largest card issuers in the U.S. In fact, its ClickCredit MasterCard program is so Web-oriented that ClickCredit doesn’t even bother with a traditional card: If you qualify, you get a number and an expiration date and a line of credit strictly for online purchases. Despite its Web-only status, the ClickCredit card has been marketed primarily to existing card customers via direct-mail and TV advertisements, not via the Web. "We found that our customers had a lot of anxiety about putting their main credit-card number into cyberspace, so we set up a separate program for Internet-only transactions," says Antony Jenkins, vice-president and director of Internet initiatives at Citibank’s North American card unit. Granted, the ClickCredit card doesn't offer any greater security for now than if you signed up for an extra credit card to use only for online purchases. And no matter what card you use, the cap on your liability if the card is stolen is $50. Nevertheless, Citibank hopes that consumers will be enticed by other ClickCredit features, such as two frequent flier miles for every dollar spent online, cash-back rewards of 1% to 2%, and a money-back guarantee on most online purchases. There is also a cozy cyber mall called CitiPlaza, where online retailers such as Barnes & Noble, Reel.com, and Dell offer special savings to Citibank customers. Not to be outdone, Chase Manhattan recently launched its Platinum ShopNow.com MasterCard. Consumers apply online, receive approval within two minutes or so, then get an instant $250 credit line. The card features no annual fee and carries a five-month annual percentage rate of 3.99%, followed by a fixed rate of 9.99. (With Chase's standard card, the fixed rate is 11.99%). Additional perks include a 5% cash rebate for certain purchases made in the products, gifts, or brands areas of ShowNow.com. Customers eventually receive a regular credit card. TREASURE TROVE. Analysts cite several reasons for "instant" Net credit and the growing number of Internet-targeted credit-card offers. One is the projected growth in online commerce. Forrester Research predicts that by 2003, some 40 million U.S. households will be buying online, generating about $108 billion in sales and accounting for 6% of all U.S. retail spending. It also projects that within five years one of every six credit cards will be issued online. Yet another reason for card issuers' rush to the Net is that it costs less to attract a customer online. An account acquired by direct mail costs about $80, vs. $25 to $50 on average online. Supplying account information online instead of by mail can also save a lot of money. NextCard pays its customers 50 cents a month if they review their account information on the Web. The ultimate incentive for signing up customers online, however, is the chance to track consumers' online spending habits ever more closely. "With an Internet credit card, you can create a treasure trove of information, and that’s what card companies relish," says CardWeb.com's McKinley. He says they use this information to target consumers for other products, such as credit insurance and travel and shopping club offers. LOYAL SPENDERS. For all those reasons, analysts say, instant credit will only become more popular over time. "You are giving customers what they want when they want it and increasing their loyalty," notes Karen Hoffman, senior analyst with Gartner Group in Stamford, Conn. "Merchants love instant credit because it potentially means a new customer who is more likely to return and use the card again," adds Rob Sterling, an analyst with Jupiter Communications in New York. NextCard’s Goebel expects that instant credit will provide powerful assistance in selling pricey "dream" vacations and large-screen TVs. Just remember, however, that no one in the credit-card business is there to do you a favor. "These new offers tend to come from issuers who are very sophisticated," says Musto of Gomez Advisors. "Therefore, you have to do an certain amount of due diligence to determine if the deal being offered is truly the right one for you." By Katherine Goncharoff Goncharoff (MediaKat@aol.com) is a freelance journalist who tracks digital business and technology trends from New York’s Silicon Alley EDITED BY DOUGLAS HARBRECHT _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ |
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