Should You Get a Store Credit Card?
This question becomes more pertinent every time you go shopping and arrive at the counter-the attendants will always try to persuade you to get a big discount by getting a customer loyalty card. On the face of it, it seems like a good plan to make some savings during these hard economic times. But before you fill that form, pause and consider if the deal is real or a hoax.
The main advantages of a customer loyalty card include:
i) Convenience and flexibility
With many cards which collaborate with MasterCard, Visa, Discover and American Express, allows one to pay for a variety of goods and services e.g. restaurants, fuel, shopping, airline tickets etc to different merchants around the world, eliminating the need to carry cash.
This also avoids the inconvenience of having to convert the buyer’s currency to the seller’s currency before a purchase. This is especially useful when travelling abroad where Forex exchanges may be few e.g. in Africa.
Buyers pay the exact amount for a good or service rendered and therefore do not waste time waiting for change after payment. This is so convenient especially in airports where flights have schedules that can be missed when late.
ii) A friend in need
A credit card allows one to purchase goods and services without money, or even better withdraw cash from them.
This is a shrewd way to keep afloat during rough patches e.g., when changing jobs, when starting on a new job after graduating or after overspending in a holiday.
iii) Exciting rewards
Credit cards offer reword points when used for payment. These points are redeemable against airline tickets, shopping vouchers, holiday trips, gift wrappings, or even getting money back after purchases.
Many stores offer up to 20% discount on purchases, allowing one to make good savings on large purchases. Value customers also get lower interest rates on their cords as a reward. Since purchases cannot be avoided altogether, it is therefore better to buy and get a reward for it rather than get nothing in return. iv) Build credit rating. If you intend to take a loan in the near future credit card could come in handy.
This is because merchants tend to be lenient in approving the cards even for those with low credit ratings. As long as you pay your balances on time, your overall credit rating could improve by up to 30%, according to Bankrate.com
v) Record keeping
Credit cards allow one to keep track of expenditure as opposed to cash purchases. Statement issued periodically allows for record keeping for future references and in decision making e.g. making a house budget.
Cash can sometimes be hard to account for, especially where sobriety is not very involved. Credit cards however have some shortcomings, including: i)Avenue for a ballooning debt Since one doesn’t have to pay for the goods or service immediately, there’s tendency to encourage impulse buying which may end up piling a large debt on the card holder. ii) Unwillingness to pay
According to Credit.com, many consumers are lazy in paying their card, even when the money is available. This allows the merchants to earn interest on card balance for the total period of default, a figure which can be punitive to the card holder.
iii) Variable interest rates
Merchants charge interest rates depending on credit ratings and not a flat rate for all customers. This means that people with lower credit ratings pay higher interests and enjoy fewer rewards.
iv) Invasion of privacy
Merchants collect personal information about the card holder, such as income levels, age, marital status, purchase records.
This is mostly used to manipulate customer taste and preferences through tailor-made marketing campaigns which may eventually hurt the card holder.
Thus generally, customer loyalty cards have many things to write home about and are advisable to have, as long as the card holder has the necessary discipline to use them carefully and pay them promptly.