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Thursday, June 21, 2012

All about credit

    Nowadays, it is not uncommon to see stores issuing cards with the Visa, Mastercard and American Express logo. In fact, most stores "sell" these cards with as much vigor as their merchandise if not more.
    During my college days, stores issued store cards only and were useless to the customer outside the store; customers had to juggle multiple store cards to use in their favorite stores. Banks were the only institutions that issued credit cards that could be used anywhere electronic fund transfers were accepted. This has changed as many stores/retailers have entered the market once dominated by these financial institutions. The reason behind it is simple; eliminate the problem of issuing cards which are basically useless to the customer outside the store while increasing and maintaining brand loyalty. In addition, stores increase profits by avoiding the fees they have to pay to use the electronic funds transfer services of Visa, Mastercard and American Express. These electronic fund transfer companies also benefit by increasing their market share and profits as well.
     Credit in itself is not a bad thing and is great when used responsibly. A few days ago, I was a bit shocked to see a customer using a Tesco credit card to make a purchase at a local retailer. Tesco is the leading retailer in the UK and I shopped there while visiting the country a few years ago; they did not issue credit cards then.
     Store cards have come a long way as retailers realize the potential of increasing brand loyalty and profits by issuing their own store credit cards so don't be surprised when asked to open an account by a salesman while shopping at a retailer near you.

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