• by Judy Warner , February 8, 2007

The notion of freedom is apparently spurring gains for Chase credit cards and tightening the competition at the top of the trillion-dollar credit card heap.

JP Morgan Chase & Co.'s credit card portfolio grew 6% in the second half of last year, passing rival Bank of America Corp. to make Chase the largest U.S. issuer of credit cards, according to the most recent Nilson Report. BofA had claimed the No. 1 slot following its acquisition of MBNA.

Chase launched its proprietary Freedom card in September using a remix of the Rolling Stones classic "I'm Free" against a backdrop of butterflies. The Freedom card allows users to earn rewards in either points or cash, and to switch back and forth.

In addition to the rewards card, a Chase spokesperson attributed some of the gain to a Hispanic advertising campaign launched in October. To keep the momentum going, Chase earlier this month launched a card aimed specifically at contractors, but the addition of that would not have been reflected in last year's numbers.

Chase Card Services managed MasterCard and Visa loans valued at $147.8 billion as of Dec. 31--6% more than on June 30, according to Nilson. Card accounts rose 8.4% for the full year to 79.5 million, the fastest growth among the five largest issuers, Nilson noted.

Bank of America's Visa and MasterCard balances increased 3% to $146.9 billion. When American Express cards are factored in, however, BofA surpasses Chase with a total of $151.6 billion in loans.

Following Chase and BofA in the top 10 were Citigroup, Capital One, HSBC, Washington Mutual, Wells Fargo, U.S. Bancorp, USAA Savings and Target.

Among the top 50 were several advancements: Advanta moved up from 12th to 11th, and Barclays jumped from 16th to 13th place. Credit One Bank (formerly First National Bank of Marin) moved up three positions (from 36 to 33). Wachovia Bank, which began issuing cards again in 2006, was a newcomer to the top 50.

A credit card researcher recently found that what drives consumers to distinguish between credit cards is the level of service. According to research by Auriemma Consulting Group (ACG), 48% of consumers think that customer service on their most frequently used credit card is "outstanding," but 44% are less committed, giving customer service a neutral rating.

Consumers are similarly divided about the quality of customer service representatives employed by card issuers. Nearly half of those surveyed said the customer service agents they speak with are well trained and able to help them with their questions or account issues. The remainder of the group was less satisfied with the level of knowledge.

"Right now, about one-third of consumers favor a particular credit card because they perceive the issuer's customer service to be outstanding," says Megan Bramlette, an ACG associate. "Clearly, issuers looking to break away from their competitors should start building exceptional customer service by increasing call center representative training and reducing hold times. These improvements would signal a departure from customer service as a hygiene function--put in place by issuers to keep cardholder relationships tidy, but not necessarily to promote greater longevity or profitability."