Warehouse credit-card scheme worries budget advisers

By SIMON HENDERY

Retailer The Warehouse expects most of its 200,000 store card-holders to sign up for a new fully fledged credit card it is promoting - a move which concerns budget advisers.

The Warehouse this week unveiled details of a new package of insurance and financial services being marketed in partnership with WestpacTrust.

The company is writing to its store card-holders offering to replace their Warehouse cards with a MasterCard credit card.

While some customers will need to provide identification, others will automatically receive the credit card in the mail unless they tell the company they do not want it.

The chief executive of the Association of Citizens Advice Bureaux, Nick Toonen, said the association was concerned at the practice of providing a credit card automatically unless a customer asked not to receive it.

"We think the onus should be the other way around - the customer is asked if they want it, and if they want it, they can take some positive action to secure it," he said.

"For many people the temptation of having credit cards and easy access to them can mean debt and great financial difficulties."

Bruce Gordon, the acting general manager of Warehouse Financial Services, said a trial of the card had not resulted in concerns being raised about the availability of credit.

"The opportunity [provided by the new card] is for people to consolidate their debt on to a single card and it is a lot easier to manage," he said.

"We, by nature, are fairly conservative about overextending credit limits. We've got a lot of experience, as has WestpacTrust, at setting limits around people's ability to pay."

Mr Gordon said customers who did not want the MasterCard could keep their Warehouse card.

David Tripe, the director of banking studies at Massey University, said New Zealanders' use of credit cards tended to be relatively low by international standards. WestpacTrust's venture with The Warehouse would allow the bank access to a large new customer base.

"It's clearly targeted at converting [Warehouse] card-holders into MasterCard holders, which should presumably generate worthwhile revenue streams for both WestpacTrust and The Warehouse."

Mr Tripe said a number of banks would have less than the 200,000 credit-card customers The Warehouse would have if it converted all its card-holders to the new cards.

The Warehouse's new financial services package includes a customer loyalty scheme.

Under this scheme, shoppers will earn 1.5 points for each dollar spent at one of The Warehouse's stores, or one point for each dollar spent on the credit card elsewhere.

Mr Gordon said that, as an example, 2500 points earned on the credit card could be redeemed for a $20 Warehouse gift voucher.

Shoppers spend more than $1.2 billion a year at The Warehouse's 75 "red sheds" and 33 stationery stores throughout New Zealand.