Your loyalty could cost you dearly

By JANINE OGIER

Shoppers may have a favourite place where they like to browse and buy, or relish the challenge of finding a bargain.

Wherever you shop, the store is in the business of doing its best to ensure you return for more.

One way retailers do this is to offer store cards.

They are available in many sectors of the New Zealand retail market - from The Warehouse, to Farmers or the upmarket Smith & Caughey.

Traditional store cards are charge cards offering customers the ability to buy goods at a specific outlet and pay the account the next month.

Retail evolution has led many retailers to offer extended credit and even branded credit cards as customers' approach to debt has become more complacent.

The main thing to bear in mind when applying for a store card is that it is a form of credit and can attract interest charges. Applications involve a credit check to determine creditworthiness.

Read the documents carefully and make sure you understand what you're getting into. Is it a hire-purchase agreement, a revolving credit facility, or a traditional type of store card?

What kind of spending limit is offered and what form will the payments take?

Staff are legally obliged to interpret the mumbo jumbo and fine print for you but some staff are better at doing this than others.

Most people use store cards as a convenient payment method and most pay off the due amount in full each month, thus avoiding extra charges.

But stores do offer minimum payment arrangements or the ability to pay off the amount over time, while the debt accumulates through interest charges.

While store cards offer benefits to customers, they are very much a business operation and in no way altruistic.

Farmers has offered credit since the 1920s. Farmers' customers could either buy on hire purchase or use a monthly account and pay store purchases off in full each month. Or there was the 20-week account, which attracted an interest charge and required people to pay it off monthly with five equal instalments.

In 1988, the Farmers Card became a revolving credit account whereby customers were able to access a pre-approved line of credit to buy on hire purchase at Farmers and 3000 other outlets. It offers 55 days interest-free credit and has no annual fee.

There are 350,000 people actively using a Farmers card. Most of them are women, many with school-aged children, and a significant number own their own home.

The credit side of the Farmers business is now owned and operated independently by Fisher & Paykel Finance, part of the listed company Fisher & Paykel Appliances.

Smith & Caughey's card can only be used at the department store and has no annual fee.

Cardholders have the option of paying their account by the end of the next month or paying the balance over four months and incurring interest costs, albeit at a lower rate than a bank credit card.

Some customers use their store card month in and month out, while others only shop at the twice-a-year fairs.

The Warehouse, in partnership with Westpac, offers a store card for use purely at its stores and a credit card for use anywhere.

The store card is aimed at customers who want to manage their budgets, as it has a lower credit limit. It has no annual fee.

The Warehouse says there's little difference in the customer age range for the store or credit card and both options are growing at the same rate.

Where store cardholders can benefit is in exclusive offers and discounts.

Once a year at the beginning of December, Smith & Caughey has a cardholder-only Christmas shopping evening with invitations to bring a friend and take advantage of discounts on the night.

Farmers Card customers get invited to pre-sales and cardholder discount events, and other outlets where the card is accepted also offer exclusive deals.

At The Warehouse, store or credit cardholders get free membership of the Kiwi Rewards programme which awards points for purchases. The points can eventually be redeemed for store products or gift vouchers.

However retailers are going about it, it's your loyalty they want.