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The Honolulu Advertiser
Posted on: Monday, January 7, 2002

New card pays bills via your paycheck

By Barbara Woller
(Westchester, N.Y.) Journal News

PURCHASE, N.Y. — MasterCard International has a new twist on credit cards that might appeal to borrowers.

Its soon-to-be-introduced e-Duction card has the appeal of debit cards, which don't cost users any interest, but the advantage of credit cards, which allow users to borrow money now but pay it back later.

The catch?

Cardholders will see their payments automatically deducted from their future paychecks.

MasterCard's plan is so new that it's difficult to find critics. But Ralph Alvarez, manager of the White Plains, N.Y., office of the nonprofit Consumer Credit Counseling Service of Southern New York, said the e-Duction cards can encourage consumers to spend money they do not yet have. This could be troubling, especially if they have balances on other cards, he said.

Nevertheless, Alvarez was impressed that the card limits the borrowing to no more than 2.5 percent of an employee's annual pay.

"Use it as a trial basis and charge limited amounts," Alvarez said. "e-Duction applies limits. That's good."

The plans were disclosed last week by Robert McKinley, of CardWeb.com., which tracks the credit-card industry. Alex Lau, a MasterCard spokesman, confirmed plans for the new card.

The card is expected to be offered as an employee benefit. MasterCard already has contracts with three companies, including IBM Corp. It generally plans to target larger companies.

An employee who uses the card to buy a $100 jacket, for example, would have $12.50 deducted from a weekly paycheck over the next eight weeks, or $25 if paychecks are distributed biweekly.

Merchants will be paid by the cards' issuer, Capital One of Falls Church, Va.

To be eligible for the e-Duction card, users must be full-time employees and at least 18 years old. They also must have been with their current company for at least six months and earn a minimum annual salary of $20,000. Cardholders also must pay a $29 annual fee.