THE golden days when credit card business reported record growth may be over as aggressive new entrants have started to erode yields on card loans, a report published by Salomon Brothers predicts. Competition has intensified recently, which points to a possible lowering of profit margins and a tougher environment ahead for credit card issuing banks. Examples include Dao Heng Bank's aggressive strategy in expanding its card base after the merger with Overseas Trust Bank. 'In less than a year, it doubled the number of cards issued through aggressive marketing,' the report said. Dah Sing Bank also introduced new methods of competition. The programme offered cash rebates for every $200 purchase, every $4 interest paid and for transferring outstanding balances from other cards to Dah Sing card. The sweetening offer of handing out rebates for interest paid is an indirect way of lowering the interest rates. It means lowering by a quarter the rates charged which is about 27 per cent on an annualised basis. 'This represents the first time a card issuer in Hong Kong has offered lower interest rates on credit card balances,' the report said. More worrying still is the incentive offered to transfer accounts. This tactic is designed to solicit customers. It may be common in the US, but Hong Kong banks are wary of a similar move which could incite an all-out war. 'Until now, non-price competition has been the order of the day, despite the absence of any official cartel,' the report said. It surmised that Dah Sing decided to rock the boat in anticipation of the entry of some big overseas players. The immense wealth generation in Asia and the high loan margin have made this market appealing to overseas issuers. 'Late-comers like Dah Sing may be looking to not just build up a critical base of card members, but to build one up quickly to prepare for the day when overseas entrants . . . emerge,' the report said. Nevertheless, the report said the established big players such as Hongkong Bank, Standard Chartered Bank, Citibank and Manhattan Card were not expected to follow as their market share would not be dented. But Dah Sing's move will soon trigger imitations. It will not be surprising to see customer poaching and price cutting becoming widespread over the next two years. 'And it will probably be a further year or two of intense competition before the dust settles,' the report said. The report even forecast that a credit card might become a pre-condition for granting a mortgage loan. If so, banks which offer a wider range of service to customers will stand a better chance of competing. Manhattan Card, deprived of a retail network and other retail banking services, will likely be disadvantaged. Other downsides in this lucrative market include the increasing saturation of card ownership and the upturn in interest rates. Increases in receivables per card are expected to slow because, 'although the unemployment rate remains low, growth of nominal income and wealth has started to taper'. An upsurge in card numbers has seen saturation rise from about 35 per cent in 1990 to about 50 per cent now. The percentage of 17 to 20-year-olds keen to get their first cards has shrunk by almost half over the past 10 years, and the slide is continuing.