Foreign and domestic banks are gearing up for an era of intense competition in the Irish credit card market. But while the current low rate of ownership represents an enormous opportunity, analysts have spotted commercial pitfalls in the peculiarities of how people here use plastic.

After more than 20 years of almost no competition at all for credit card customers, the steep rise in activity in the past 12 months is a firm indicator of what's to come.

Already, new companies are moving into the market, offering lower monthly interest repayments or spending incentives.

For example, a new company, MBNA International, is now offering a Visa and Visa Gold card with an APR that undercuts both Bank of Ireland and Allied Irish Banks. Earlier this month Eircell unveiled its own Visa card, offering points, redeemable against a mobile phone bill, to customers who shop in certain stores.

Other financial services companies planning to do business here will be scrutinising patterns of credit card usage in the Republic. While The Irish Times/MRBI survey reveals that just one in five adults have credit cards - compared to four out of five in the US - another key factor, buried deep in the figures, is of particular significance to those hoping to expand here.

The most affluent, high-spending sector of the population is known in market research jargon as AB-C1-F1, and includes, doctors, lawyers and other professionals, white-collar workers, teachers, higher civil servants and farmers with more than 50 acres of land. The survey shows that two thirds of these adults still do not have a credit card.

However, any company moving into the market will also be able to see a trap; the same survey indicates that 74 per cent of those who now have cards clear their entire balance each month. This means that while the customer gets up to one month's free credit each time, the lending institution cannot charge interest on any amount.

In marketing terms, this would greatly reduce the lure of "lower APR" offers common in Britain and the United States - three quarters of current users in Ireland don't care what the APR is because they never pay it.

These factors mean that Irish consumers can expect in the months ahead a two-pronged strategy from the credit card operators. Firstly, the companies will hope to encourage more people to apply for credit cards, using various shopping and entertainment incentives. Secondly, they will attempt to change payment patterns - beginning with their new applicants, and then with current users - nudging customers away from clearing the balance each month.

Another area where card issuers can add value to a card while encouraging extra spending is foreign travel. One of the advantages of a credit card is that even if customers are using cash or travellers cheques when abroad, plastic in the pocket assures them that they can withdraw more cash if they need it at any time.

With overseas travel, especially for business, on the increase, credit cards are likely to be marketed as an insurance product. Analysts expect the credit card companies to offer further travelrelated incentives, such as free insurance for tickets bought with plastic, and free collision damage waiver on cars hired on credit. Meanwhile, consumer interest groups are already warning anyone applying for credit cards to read the fine print in application forms, paying special attention to clauses about fees and charges. The more ruthless companies often try to reap profits from everyday human error, such as paying the bill a couple of days late.

Other trends in the United States, where many people have several credit cards, focus on building up loyalty to one bank over another. While some, such as giving a free air mile for every pound spent, may take some time to cross the Atlantic, others seem sure to arrive soon.

For example, Capital One, a US bank, allows customers to put any photograph they like on the front of their cards. Whether they choose spouses, children, family pets or sports stars, the company reckons users are more loyal to the image they have chosen, more likely to use that card over another, and less inclined to discard it for a rival.