US giant launches assault on UK credit card market

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

British consumers can choose from 68 credit cards; most have no annual fees and extras such as Air Miles or discounts on shopping. Capital One Bank and Northern Rock offer cards charging interest rates of 11.9 per cent. Barclaycard still charges a pounds 10 annual fee and interest on purchases of 18.9 per cent.