Citicorp officials want to get into your pocket by giving you a Choice -- a Choice credit card.

Citicorp's blue plastic, "private label" card, born and based outside Baltimore, is quickly and quietly capturing a growing number of customers for Citicorp nationwide by offering a range of services that tap into a handful of other Citi products, including money-market accounts, student loans, mortgages and unsecured lines of credit.

Since it appeared in the Washington-Baltimore region five years ago, Choice has taken the credit world by storm, analysts say. From about 125,000 intitial cardholders, the customer base has grown to 1.25 million; Citicorp officials predict that eventually one in 10 American households will have the card, and that total transactions could reach $50 billion a year.

The potential profits from interest -- 21 percent in this area -- and merchant fees are huge, analysts agree. But at least as important is the name recognition and customer base that Choice has given Citibank, the nation's biggest bank, outside its New York City headquarters in this crucial test period for interstate banking.

"Choice has been able to build our customer base faster and more cheaply than any other division product," Ronald E. Geesey, former president of Citicorp Financial Inc., told New York banking analysts last year. "In only four months, Choice in Denver has booked five times as many customers as have our Colorado Person-to-Person and industrial banks combined. In fact, Baltimore/Washington has the greatest number of Citicorp customers in any market Citicorp serves outside of New York City."

Those advantages have put fear in the spreadsheets of credit and banking companies that compete with Citicorp, and several are developing products similar to Choice. Sears, Roebuck & Co.'s much-ballyhooed Discovery card, for example, is modeled closely after Choice, according to H. Spencer Nilson, publisher of The Nilson Report, a newsletter on the credit industry.

In Nilson's view, Choice is "the best bank-card package ever put together" -- not least because it lets Citicorp cross-sell other services that eventually could include stocks and bonds.

"It covers all the bases," he said. "It has something for everyone. It's the card of the future for Middle America."

Choice officials describe their cards as an attempt to create a Citicorp "house brand" that competes with MasterCard, Visa and American Express for the upscale, but "value-conscious," credit user.

In that respect, it is just another addition to Citicorp's growing, and highly profitable, house of cards. The New York bank-holding company already is the largest U.S. issuer of MasterCard and Visa, with a total of 7.4 million cardholders.

It also owns Carte Blanche, a travel and entertainment card with 300,000 members, and the U.S. rights and a number of foreign franchises to Diners Club, which it purchased in 1981 and has boosted to 3 million accounts worldwide.

Those figures translate into a virtual plastic empire for Citicorp. According to Nilson, last year the company was second in the United States behind American Express Co. in dollar volume on its cards ($14.16 billion), third in transaction volume, behind Amex and Sears (360 million), and second to Sears in total credit-card debt ($4.38 billion).

Choice, so far, makes up a minor part of that empire. This year, for example, transactions charged are expected to total only about $1 billion in a handful of states where the card has been introduced: Virginia, Delaware, southern Pennsylvania, Colorado, North Carolina and Florida, as well as the District and Maryland. (Citicorp refuses to release profit and revenue figures for the card.)

Plans, however, are quite grand: "Citicorp is targeting a $1.5 trillion U.S. consumer saving market, and moving toward full-service nationwide banking via credit cards rather than local branches," Nilson wrote in the November 1983 issue of his newsletter. "We are talking about tens of millions of cardholders," Geesey, now with Citicorp's Dusseldorf office, told analysts a year later.

Choice started small: as the Northern Acceptance Corp. (NAC), a Baltimore-based credit-card company in financial trouble when Citicorp purchased it in 1974. Reintroduced as Choice in 1980, and relocated to Towson, the company bought the money-losing Central Charge Service from Riggs National Bank in 1982, adding that card's 250,000 accounts in the Washington area.

But Citicorp's researchers and strategists -- envied for their ability to predict trends and find legislative and regulatory loopholes to meet their goals -- always had big ideas for the card.

They predicted in the late '70s that the hotly competitive credit market would get hotter -- and more lucrative -- as prime interest rates fell and the spread widened between the amount banks pay to borrow funds and the amount they can take in from interest on unpaid credit accounts.

Building a House Brand ---

Bank strategists -- led by Citicorp's current chairman, John S. Reed -- set about acquiring cards or expanding membership in all ranges: the popular Visa and MasterCard bank cards, so-called because they are issued by banks, with annual fees of about $20, and the more exclusive travel-and-entertainment cards (Diners and Carte Blanche), which charge initiation fees of $40 to $45.

Researchers found, however, that baby boomers -- the biggest users of credit -- lacked a card that combined prestige, "value" and wide availability. And the same customers wanted convenient financial services that they weren't getting from many local banks and savings institutions. Enter Choice.

From the beginning, "the Choice proposition has been value," said Margaret Alton, recently named chairman and CEO of Citibank Md. NA and head of Choice operations. (She also replaced Geesey as president and CEO of CFI.) Unlike the bank cards and travel cards, Choice has no yearly fee, and it rebates one-half percent of the amount purchased over $600 in a 12-month period.

The "house brand" feature is particularly important because it lets Citicorp "try different things [from what we can do] with Visa and MasterCard . . . where we have to get the approval of the other members of the association" that owns the rights to the cards, Alton said.

These "different things" include a range of financial services that have irked rival banks and federal and Maryland regulators, who viewed them as an attempt to get a head-start on interstate banking.

"The Choice proposition" has let customers do by mail and credit card virtually everything they can do through a bank: make deposits, take out loans, earn interest on savings, withdraw cash quickly and get their checks guaranteed.

Shortly after its launching in Maryland, for example, Choice introduced Purchase Plan Plus, which allowed holders to set aside funds for future use and earn 8 1/2 percent interest (compounded) on the accumulated balance -- more than the interest allowed on deposits in federally insured savings accounts. Customers could participate in the plan with just $25. Cardholders also could get cash advances, short-term loans of $2,500 to $10,000 and automated check approval at stores.

Those plans immediately ran afoul of the Federal Reserve Board, which said Citicorp hadn't consulted it first and ordered them halted. The services later were reinstated, in a slightly modified form, though they have been supplanted by another plan called Choice Reserve, the money-market account.

More recently, Citibank took advantage of a 1983 Maryland law allowing it to establish one limited-service bank branch in Towson, and then used the facility to establish money-market accounts for Choice holders throughout the country. Another option, called the MoneyBuilder savings plan, lets cardholders set a savings goal, and if they reach that goal in the agreed-upon time, rewards them with a 1 percent bonus. Finally, customers can use the card to gain access to more than 1,700 automated teller machines in Colorado, California, Florida, Texas and the Pacific Northwest. It also gives them an entry to -- though not preference for -- Citicorp mortgages and student loans.

All these services -- usually administered by other Citicorp subsidiaries -- are advertised in special mailings and inserts to monthly bills. Analysts and business publications say the potential revenue and profits involved are staggering, although Citicorp declines to give details.

Choice has been a perfect tool to test new types of financial services, and to gain customers for them, former CFI president Geesey told New York analysts last year.

"Typically, the consumer has multiple credit cards but does not usually have multiple checking accounts, savings accounts or mortgages," he said. "All too often, for a financial institution to sell a product, it essentially has to 'unsell' the product of some other institution. This is not true of credit cards.

"It readily became clear that a credit card is an ideal vehicle to gain trial with a new customer," Geesey continued, "and since it is delivered by mail, it can cross state boundaries without restriction."

Choice officials have expanded slowly, though aggressively, moving first into states bordering the Baltimore-Washington region. Results were so promising -- according to Alton, in this area, customers use Choice as much as Visa and MasterCard and more often than American Express -- that in 1983 Citicorp decided to "experiment" in the Denver area.

A media blitz and direct-mail campaign have resulted in impressive gains there, analysts say, and Geesey agrees.

"We did not buy into an existing card as we did with NAC in Baltimore-Washington, and Denver was not a contiguous market, as was Virginia," he said. "We came in as complete unknowns as far as our customers were concerned. Our growth from this zero base line is remarkable."

The key to the card's success, Geesey and Alton agree, is the willingness of stores to accept it. Geesey called it the "domino theory of credit-card expansion. Once store 'X' down the street offers customers the Choice card, every other merchant wants it, too."

The bank company has expanded that merchant base in part by using the economies of scale in its huge credit-card processing operations (based in South Dakota).

To get into Virginia, for example, it started a price war, according to Forbes magazine, offering to process credit slips for merchants accepting Visa, MasterCard and Choice at about half a percentage point below the amount charged by local banks. To protect their business, the Virginia banks offered to sell Choice to the merchants whose slips they processed. Citicorp has struck comparable deals in other areas, Alton said.

In recent months, national retailers, including K mart Corp., have fallen into line, as have airlines, car rental agencies, travel agents and restaurants. According to the most recent figures, 60,000 outlets now accept the card, and Alton expects about 100,000 by the end of this year.

Citicorp has used similar methods to expand its other cards, and with similar objectives. By Nilson's estimates, Reed probably spent $150 million to $200 million to promote all Citicorp's cards last year.

Surprisingly, the fast growth of this empire has caused little concern among consumer groups, which don't seem worried that its dominance will hurt the interests of consumers.

"It's not a bad thing, on the face of it," said Marla Kaplan, of Bank Card Holders of America, a consumer credit group in Washington. "Other markets, other kinds of cards are being developed to compete. I think it's going to spur a lot of competition."

Kaplan's only gripe is that Citicorp will continue to charge high interest on all its cards -- particularly Choice.

"We think that if you want to be the new card on the block, and advertise yourself as giving good value, you want to come out with interest rates that are not only competitive, but fair."

Citicorp's -- and Choice's -- major critics have been local banks competing with it for customers in this area. Citicorp's 10-year presence in Maryland (since its purchase of NAC) has given Citibank a toehold in interstate banking in this region -- considered by analysts one of the ripest areas in the country.

This spring, Citicorp successfully petitioned Maryland legislators to pass a bill allowing out-of-state bank-holding companies to set up full-service banks in their state. State banks lobbied vigorously against the plan -- which required Citicorp to spend $25 million and employ at least 1,000 workers at a credit-card processing plant it would establish outside depressed Hagerstown -- but Alton and others prevailed in part because they convinced legislators that they cared about the state -- not just about making a fast buck. (That plant will not process Choice slips, Alton said.)

"Citibank is very much a part of the fabric of this community," said Alton, an executive with Citicorp for 16 years. "We've been here 10 years. The company donates money . . . our executives sit on boards. . . .

"When I talk, in my head, I am Citibank Md., not Citicorp," she added. "I am very much a Marylander, . . . and I am delighted because they are beginning to speak of us as a local bank. . . . "

She discounts critics' claims that Citibank's unstated goal is to gobble up smaller local banks by undercutting them and driving them out of business. "We're in this business to be successful. We're not going to be a successful business if we're going to offer extraordinarily high rates of interest, or make loans at extraordinarily low rates."

While the Citicorp bill passed by the Maryland General Assembly in March will let the bank open several full-service banks in the state by 1986, it specifically forbids out-of-state money-center banks from merging with state banks for a number of years.

Experiment Encourages Imitators

Citicorp's successful experiments with Choice have encouraged other companies -- including Sears, Amoco and Home Beneficial -- to jump into the waters with similar products. But at the same time, the onset of real regional banking -- the ability to set up full-service bank branches that take deposits, make loans, etc. -- has Choice officials reexamining some of the key components of the card.

"What we are seeing now is a proliferation of cards that are, in a sense, a bank in one's pocket," Alton said. "As the legal environment becomes [better for interstate banking], we are adjusting the Choice proposition. Our customers no longer need Choice to be a bank in one's pocket.

"We can help them get those exact same [financial] products . . . through full-service bank branches and our Citicorp financial account. What our target market wants now is a real credit card," she said, adding that Choice would concentrate on increasing the number of outlets that accept the card, thus enhancing "the card's utility."

"If they call us, and they are interested [in bank-like services], we will put them in touch with the right people, but we are interested in being the best [credit card] we can be."