Kinds of Credit Cards

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Store Cards

As solid, steady growth continues to elude most of the nation’s big merchants, many are aiming to enhance shoppers’ purchasing power by offering new credit cards bearing their names.

“Retail executives are just starting to realize how powerful the data they capture with their credit cards is,” [ and head of re tail consulting at Manhattan management consultant McKinsey & Co.] Graham added: “The marketing potential should be perceived as the true value of the cards.”

—Valerie Seckler in HFN [ Furnishing News]

Lots of stores—department stores, auto supply stores, computer stores, chain stores, gasoline companies—have their own credit cards. They have them for three main reasons:

1. Credit cards help sales. Traditionally stores make their money by selling their wares. Many studies have shown that people spend more money at stores where they have store-issued cards.

2. Stores make good money by financing their customers’ purchases at high interest rates. In fact, many stores report making more money on their credit card operations than on sales of merchandise.

3. The stores have started to data-mine the very valuable information they can get from looking at the record of what you buy.

Advantages of Store Cards . Store cards certainly aren’t all bad. Aside from the usually very high interest rate, they do offer you several pluses.

They are easy credit cards to get. Even the cards of the prestige stores such as Saks, Nordstrom’s, or Neiman Marcus are not so difficult to come by. In fact, the classy store cards are often much easier to get than less prestigious cards. Sears and JCPenney are reputed to be tougher than Neiman Marcus, for example.

The gasoline company cards are said to be the easiest of all cards to get. The gas companies want you to buy at their stations. They think you are more likely to pull up to their pumps if you have their card in your wallet. The old-fashioned oil company card, now being phased out by some companies, has no annual fee, charges a pretty high annual interest rate of around 18 percent, and has a very low credit limit—say, $300 or $500. Such an oil card can be used only at gas stations selling a certain brand of gas. But today, some newfangled oil cards can be used to charge airfares, meals, and hotel rooms. The oil companies have decided there is a lot of money to be made in the charge-it business. So the oil cards are looking more and more like bank cards—usable in many places. In fact, some oil companies have set up banks just to issue combination oil card/bank cards. Other store cards may try to make the jump to combination cards in the near future.

Stores know that if you have their card you are more likely to shop with them and are likely to spend more than you would if you had to take cash dollars out of your wallet. So they gladly pass out cards to anyone who looks as though they might be able to pay the bill.


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Wednesday, December 17, 2008 17:38