Supermarket group Tesco aggressively enters the financial services market today with a Visa card offering an APR of 4.9 per cent.

The rate applies to purchases and balance transfers from another credit card, until January 1st, 2001, when the card moves to a standard rate of 15.9 per cent APR.

The supermarket chain's reduced APRs may mark the opening bid in a war between the State's credit card providers which have among the highest margins in Europe.

Tesco hopes to emulate Bank of Scotland and Northern Rock whose entrance here shook up the mortgage and deposit account markets. Until now, the lowest standard rate credit card was the 17.5 per cent APR claimed by Tusa, the joint venture between TSB and Superquinn.

AIB and Bank of Ireland, which combined control about 70 per cent of the credit card market, offer standard card APRs of 18.9 per cent. Other competitors' APRs for purchases are: National Irish Bank, 18.2 per cent; MBNA, 18.9 per cent and Ulster Bank 19.9 per cent.

Tesco claims a person switching a £3,000 (€3,811) balance from an AIB Visa card will save £252 over a 12-month period. This figure takes the introductory and standard rates into account.

Over the past year, competition in the credit card sector has increased with some providers introducing short-term reduced APRs for balance transfers.

But some affinity and gold card members regularly benefit from lower than normal rates. For example, AIB's gold card APR matches Tesco's standard rate of 15.9 per cent.

The newly introduced credit card is provided directly through Tesco Personal Finance (TPF), a joint venture between the supermarket chain and the Royal Bank of Scotland.

The company was founded in 1997 and this is its first venture overseas.

In the UK, TPF offers numerous financial products including: savings accounts, loans, travel, motor and home insurance, pensions and credit cards. Industry sources believe similar products will be rolled out here if the credit card launch is successful.

Initially, Tesco will use its Clubcard database here as a platform for the new credit card. Using a similar approach, the British parent company attracted 1.75 million customer accounts and currently shows strong growth in Visa accounts.

Consumers here who are not Clubcard members may apply for the card at any time using a freefone number, according to Tesco.

Tesco's strategy will ultimately benefit consumers with lower credit card rates. A recent European bank pricing survey found that Irish credit card APRs were among the least competitive in Europe.

The State's average APR of 19.37 per cent is the second most expensive in Europe following Spain's 22.2 per cent average, according to the survey commissioned by Bank of Ireland. The figures were derived by calculating the average fee across each bank's standard Visa and Mastercard products. Discounted introductory offers were excluded from the analysis. Low interest rate and high penalty cards were also excluded.

Market penetration for credit cards here is 22 per cent, a low figure compared to the UK's 44 per cent. Fifty-five per cent of Irish credit card customers clear their balance each month.

Card rates here are expected to fall further as more consumers become credit card members.