Store credit cards are offered every day by retailers with promises of discounts and special offers. It’s almost impossible to say no to those 10% to 20% discounts on your first purchase and subsequent discounts on other purchases. But is taking store credit cards really to your advantage? Do you really end up saving that much by using them? There is no question about that retailers offer more discounts with their credit cards when you purchase at the store than with other financial products or even when you pay in cash. However, what is the cost concealed within these offers? The store must be getting something out of it; otherwise they wouldn’t do it. But what is it? Customer Fidelity What stores get in exchange from these offers is customer fidelity. They make sure that you’ll keep buying at their store. Thus, they are guaranteeing an income from which they’ll benefit in terms of interests. Customer fidelity is a very important thing for companies. Most companies spend a lot of money to secure customer fidelity. But in this case, the one paying for it is the same customer that they want to turn into a regular company’s customer. Interest Rate Charged For Financing Another thing they get, that may sound as the most important one but not always is, is the return for financing your purchases. When you purchase goods and don’t pay the whole balance at the end of the period, you are financing your purchase and they will charge an interest rate for the unpaid balance. All credit cards charge an interest rate for this service with the sole exception of certain promotions that charge a 0% interest rate for financing but only for a limited period of time. However, the interest rate charged by store credit cards is significantly higher than the rate charged by most regular credit cards. Thus, though you might get that 10% discount on the retail price, you may end up overpaying due to the high interest rates that are charged for financing. Sharing Your Data For Revenue Also, most stores share your personal information with other companies so these companies can send you offers and promotions according to your needs and buying behavior. Of course, they don’t do this out of the goodness of their hearts. They actually charge a fair amount of money for providing their databases that are packed with very interesting details about you and your buying habits. If you are concerned about your privacy, you should always read the contract thoroughly before signing cause you may be giving written authorization to disclose this information and you may not be noticing it. This is a common practice among stores. Those stores that can obtain a fair amount of data about their customers usually sell this information to other companies and that’s the reason why people get offers in their mails with attractive content and they don’t know where did these companies got their contact information. As you can see, before jumping in to accepting that store card that they are offering you, you should consider all these variables and analyze whether it is really to your advantage.
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