Friday, March 30, 2001

Bankoh credit-card
holders start switching
to American Express

The bank is offering user
incentives for the 150,000
customers who are affected

By Russ Lynch

This weekend is the big roll-out for Bank of Hawaii's shift of its credit card portfolio to American Express and despite some confusion about the shift, both companies say it will be good for their consumers and good for their shareholders.

Bank of Hawaii Holders of Bank of Hawaii credit cards, who number about 150,000 individuals and businesses, have been receiving their new Bank of Hawaii American Express cards and with a phone call can activate them and put them to work starting Sunday.

Cardholders are being offered immediate incentives to favor the change. There will be no interest charged on purchases made during the first six months and no interest for six months on balances transferred from other credit card accounts. In addition, American Express touts the global acceptance of its cards.

Gilbert E. Ahye, senior vice president of card development for the American Express consumer and small business development group, set out to put down what he said are myths about American Express cards. One is that there are many merchants who won't accept them. "That is a myth," Ahye said in an interview in a Bank of Hawaii conference room. Customers will have no problem using their American Express cards anywhere, except for a few holdout businesses, he said.

Thomas P. Mullen, director of consumer service travel and establishment services for American Express in Hawaii, said merchant acceptance level is high and growing, despite Visa card advertising suggesting those switching to American Express will be disappointed.

Earlier this month American Express added the Daiei stores in Hawaii, the DTRIC insurance business and the Sizzler restaurants to its merchant base.

But businesses who won't accept American Express say they have a good reason: It costs them too much.

Lyle Fujioka, owner of Fujioka's Wine & Spirits in Kaimuki, said Visa and most other cards take a 2.2 percent processing fee out of the merchants' transactions. American Express takes about 3.4 percent, he said.

"When you're operating at a 10-15 percent margin, 1.2 percent (more) of the total sale is a lot," Fujioka said.

Joanne Fisher, an American Express spokeswoman here for the launch, said the company's dealings with its merchants are private and it won't comment on them. But she said those who do accept American Express cards see that American Express holders spend more per transaction than other card holders.

That is true, said Ivy Nakayama, general manager of the Sansei Seafood Restaurant and Sushi Bar in Restaurant Row. "I know that it is a higher fee, but we feel that it is worth it," she said. "We get a lot of business travelers and they use American Express and they spend more."

"We accept other major cards like Visa and MasterCard. There's a lot of press about the higher fees at American Express, but it seems to meet our customers' needs," Nakayama said.

The other myth, a big one in Ahye's view, is that American Express charges have to be paid in full each month. The card going to Bank of Hawaii card holders is a genuine credit card and users are free to pay it off or make monthly payments, he said.

Lori McCarney, Bank of Hawaii executive vice president and director of marketing, products and communications, said the decision to sell the credit card portfolio to an arm of American Express was made because the bank's own credit card operation was only marginally profitable and big credit card issuers were able to offer more services to customers.

American Express was a better fit with the island bank than other issuers, she said, and removing the card business lets the bank get on with ventures that will be more profitable and benefit shareholders of its parent, Pacific Century Financial Corp.

American Express has designed a kickoff campaign that will include a big boost for island charities, starting with a $100,000 grant to the Hawaii Nature Center and an additional donation for every transaction made with an American Express card in Hawaii, which will bring another $100,000 to the Nature Center, company officials said.

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