The department store credit card was in practice before the credit cards that we have come to know and use today.
What value can branded store cards provide?
Branded store cards are a good choice because they have great rewards programs. If you shop often, you are given perks such as free gifts or discounts on merchandise and take advantage of many more deals.
These were cards that were specific to the store and could only be used there. These cards were limiting, however, as you could only use them at the particular merchants offering such a card. Slowly credit cards began to replace this type of department store credit card though there are still a few that remain.
Now, many of these same merchants offer what is called a branded credit card. These cards are tied to a particular store and offer perks to those who choose to carry their card. The processor of the card is usually Visa or Mastercard with the logo of the merchant displayed on it.
These cards, however, are not officially given by the store. It may have the logo on there but the account is managed by another bank. This bank will set the credit limit, who handles administration of the account, and who handles default cases. The bank will take a share of the profits from the store.
If you want a credit card that is issued by a particular merchant, you can probably acquire one with little effort. You can apply at the store directly. These cards are a good choice for people who have little to no credit.
The drawback to these store credit cards is that you may be charged a significantly higher interest rate. While it is easier to get the cards, this means that it is a higher risk to the merchant resulting in higher rates to the consumer. You will have to weigh your options to see if this card is worth the benefits.
One disadvantage is that you are limited only to the items that are available in the store. The rewards do not often extend to other retailers. And, if you don't shop a lot at these stores, it may not be worth your while. You will have to determine what kind of shopper you are and if the rewards program and benefits will be enough for you to want to join.
How do credit providers make money out of store credit cards?
When you use your credit card, the store is paid a certain amount by the credit provider, but first the credit provider takes a commission before paying the money to the store. Interest charges are also levied by the bank from its credit card owner for the debt they have as well as fines and penalties imposed on the credit card such as late payment fees.
Which financial institution is my store credit card with?
|David Jones||American Express Australia Limited|
|Myer||Latitude Finance Australia|
|Coles||Latitude Finance Australia|