San Francisco-based NextCard Inc. and FirstUSA, an example of two leading players in online credit cards, are enticing cyber applicants with instant approval, no annual fees and ultra-low introductory interest rates.

NextCard and FirstUSA, the credit-card unit of Chicago-based Bank One Corp., accounted for nearly half of the four million online credit-card applications last year, according to Forrester Research of Cambridge, Mass.Credit companies are offering a host of incentives -- including cash rewards, and discounts on airline tickets and purchases at online retailers -- as they fight for customers on theInternet.

While NextCard and FirstUSA are among the few that offer consumers a chance to open an account online, many more are using the Internet to peddling cards.

A recent survey by bankrate.com, an electronic publication that follows the industry, found nearly 300 credit card marketing offers in cyberspace from 59 different issuers.

But virtual credit is rising. Forrester Research estimates 4% of all credit cards - or 990,000 - will be issued over the Internet this year. By 2003, 16% of all cards, or 3.6 million, will be issued over the Internet.

Some companies also are allowing customers the convenience of reviewing account information, making payments and corresponding with customer-service representatives over the Internet.

Credit-card companies have their sights trained on the astounding growth in consumers shopping by computer on the Web. They want to share in that phenomenal growth through credit-card charges.

Jupiter Communications, a New York market-research firm, estimatesonline purchases in the U.S. will grow to $41 billion by 2002 from $3 billion in 1997.

Moreover, the research firm estimates the number of people who shop at the increasing number of online retailers will reach 58.4 million by 2004, up from 10.1 million in 1997.

Credit cards are now the preferred currency on the Internet, accounting for 90% of online payments last year in the U.S., according to industry-research firm CardWeb of Gettysburg, Pa.

Meanwhile, individual issuers are jostling to make their card the one consumers use early in the game because of the prospect for repeat business as retailers try to make electronic payments hassle free.

To save consumers the inconvenience of having to re-enter their credit-card numbers each time they make a purchase, many online retailers have established electronic wallets that record the information the first time for use later.

Customers who make subsequent trips to online stores such as Amazon.com and other leading Internet retailers can pay fortheir purchases using the stored information by just clicking a button.

As more consumers use their credit cards to shop online, issuers are dangling hot deals on the Internet to get some of that business. Some lenders are offering online credit cards specifically designed to appeal to online shoppers.

While customers who apply by mail or phone wait weeks for approval and a card, some issuers give newly approved online applicants their account numbers right away so they can begin shopping immediately.

Both NextCard and FirstUSA, which are promoting their cards in marketing deals with Internet portals or popular Web sites, give online applicants instant approval.

NextCard is offering Visa cards with an introductory interest rate as low as 2.9% for three months to customers who transfer large balances from other credit cards. Regular rates are as low 9.9%.

Card holders earn bonus points for online purchases. They can redeem the points at retailers such as The Gap Inc., Barnes & Noble Inc., Macy's andairline tickets.

NextCard goes a step further to align itself with e-commerce by offering an area called GoShopping! -- an online resource which allows consumers to search for products online and hunt for bargains.

And in a unique touch that capitalizes on technology, NextCard allows customers to personalize their cards with their own photographs or one of many images available on its site.

The company, which recently filed documents with the U.S. Securities and Exchange Commission for an initial public offering, has exclusive marketing deals with sites such as usatoday.com.

FirstUSA, which is pushing an e.card Visa, also is offering to co-brand cards with portals Yahoo! and America Online. It has recently sewn up exclusive marketing arrangements with Excite and Microsoft's MSN.

FirstUSA offers introductory rates of 3.9%. The rates are bumped up to 9.9% after five months. Like NextCard, the company also offers card holders discounts for online purchases.

In a move to ease any concerns aboutcredit-card security, both FirstUSA and NextCard will waive the $50 consumers would be responsible for if their credit-card numbers are used for unauthorized Web purchases.

The online move by credit-card companies is winning accolades from consumers, who like the convenience of being able to access statements and pay bills on the Internet. "The concept is excellent," says Samuel Rock of Waldwick, N.J., who obtained his NextCard last June. "The application process was easy." The whole process "only took about five minutes," he added.

While the online credit card might be attractive, Steve Rhode, president of Debt Counselors of America in Gaithersburg, Md., warns applicants "to exercise the same level of caution" as they normally would in seeking credit. He said the low interest rates offered to lure Internet users should not matter to consumers who pay their balances in full each month. Those rock-bottom rates could quickly evaporate -- just as they would for any credit card -- if consumers pay theirbills late, says Linda Sherry of San Francisco-based Consumer Action.

For example, interest on FirstUSA's online cards jumps to 19.99% if a payment is received late twice during any six-month period, or 22.99% for two consecutive months. But most card issuers have similar policies. Despite high-profile moves by a some issuers to peddle cards over the Internet, most credit-card applications still come in the mail. Direct mail accounted for 76% of all applications last year, and the Internet only 2%, according to BAI Global Inc., a market-research firm in Tarrytown, N.Y

By arrangement with The Wall Street Journal