Citicorp, conceding defeat in a multimillion-dollar bid to develop its own brand-name charge plate, will convert its Choice credit card to a Visa card Sept. 1.

The change means that Citicorp's nearly 2 million Choice card holders -- most of them in the Washington-Baltimore region -- must start paying an annual fee of $20 for the converted card and will no longer be offered rebates on purchases made with the card. The increased costs will be offset in part by lower interest-rate charges, which will be cut 4.2 percentage points to 16.8 percent, according to a Citicorp brochure.

Rebates and lack of an annual fee were key selling points of Choice, which had an annual interest rate of 21 percent. A Citicorp spokesman said yesterday he hoped the changes would lure more customers for Citicorp. He said there would be no effect on jobs at Choice's headquarters in Towson or Citicorp's major credit card processing plant in Hagerstown.

In recent days Citicorp sent letters to Choice customers announcing the conversion and giving a toll-free number to call with questions.

Yesterday afternoon, callers of the toll-free number heard a 10-minute recorded message promoting the converted card before they reached a Citicorp representative. "Yes, we've had a lot of cancellations," one of the Citicorp operators said.

Folding the Choice operation is another notch in a series of belt-tightenings by Citicorp, the nation's largest bank company. Last month Citicorp stunned the banking community by deciding to increase its reserves against loan losses in South America by $3 billion.

But failure of the Choice card experiment has wider significance in the increasingly competitive arena of financial services, where Citicorp butts heads not just with banks, but with retailers such as Sears, Roebuck & Co. and securities firms such as Merrill Lynch & Co.

Citicorp intended Choice to be a major marketing tool to sell everything from mutual funds to mortgages. Sears is following the same strategy with its Discover card.

The inability of a company the size of Citicorp, which has 191.4 billion in assets, to succeed with a proprietary credit-card operation raises questions about the viability of such cards among institutions competing nationwide for consumer banking business. Converting the card to Visa is an admission that the idea was not catching on fast enough to make it profitable.

"I am pleased to announce that soon you will receive a new Choice card that is better than ever," Margaret Alton, head of Citicorp's Maryland operations, wrote in the computer-generated letter sent to consumers. The Choice card is issued through Citicorp Maryland.

Visa International and MasterCard International make money by selling franchises. Banks that buy such a franchise issue credit cards bearing the Visa and MasterCard logo. In addition, Visa and MasterCard make money by charging merchants a fee for purchases made through a Visa or MasterCard plate.

Citicorp created its own card in the hope of by-passing those franchise fees. It also hoped to collect the fee that the Visa and MasterCard companies charge merchants on credit-card sales. And it hoped to market other Citicorp products to holders of the Choice card.

Citicorp focused the Choice card experiment in the Washington-Baltimore region seven years ago when it bought N.A.C., a credit card issuer in Baltimore. In recent years Citicorp started marketing Choice in Colorado and Florida, but the bulk of Choice customers remained in this area.

Users of the Choice card were offered a rebate of one-half of 1 percent of charges above a certain amount. There was no annual fee.

Citicorp set up its Hagerstown credit-card processing plant two years ago in exchange for permission to open a full service bank in Maryland. The plant processes Choice and Visa cards. Citicorp is the largest issuer of Visa and MasterCard credit cards in the United States. In addition to its Hagerstown plant, Citicorp has credit card processing plants in South Dakota and Nevada, which also were opened in exchange for the promise of banking privileges in those states.