Steve Case’s investment company Revolution LLC has announced the launch of Revolution Money, a new credit card firm that will use the internet to offer lower interchange fees and PayPal-like money transfer.  The company, which was formerly GratisCard before Revolution took a controlling stake in 2006, has raised $50 million second round from Citi, Morgan Stanley, Deutsche Bank, Ted Leonsis, the vice chairman emeritus of AOL (NYSE: TWX) and chairman of Revolution Money, plus more funds from Revolution LLC.  It says its RevolutionCard credit card will offer payment processing at a fraction of what traditional firms charge.  It’s also promising better security, as the cards won’t have the individual’s name on them.

SEE ALSO: AOL Founder Prepares Health Site As Challenges Grow

In addition to its credit card, the company is also establishing a PayPal competitor dubbed Revolution MoneyExchange.  The company is partnering with AOL’s AIM service to deliver free peer-to-peer money transfer, which is along the lines of eBay’s (NSDQ: EBAY) plans to integrate PayPal with Skype.  Eventually, the company plans to link the money transfer and credit card services.

In addition to the involvement from Case and Leonsis, the board carries some heft in the financial community with members including Larry Summers (former U.S. Treasury secretary), Franklin Raines (former CEO of Fannie Mae), David Potruck (former CEO of Schwab), and Russell Hogg (former CEO of MasterCard), whose son Jason Hogg is the company’s co-founder and CEO.

By going after interchange fees, Revolution Money is hitting on a vulnerable area for credit card companies, which are dealing with increased frustration among merchants and politicians looking at possible antitrust violations. Release.