Why do so many stores have their own credit cards? What’s the benefit for the retailer?
In: 4
There are many layers to this answer:
1) reduced costs. If a shopper wants/needs to use a credit card, the store will pay a fee for that transaction (let’s say 2%). If you use a store card, you still get to use a credit card, but now their fee is the overhead they have with their bank servicing the card, and they get to set the terms and have more protection themselves
2) instead of you paying interest to your credit card company, when you carry a balance, they’re collecting the interest (often higher too)
3) it entices you to shop there more frequently
4) going back to #1, they can use the savings to offer you a discount, strengthening #3
5) data mining – they can further analyze shopper habits to better market towards you and to sell that data
6) perceived goodwill – if your shoppers are signing up for your merchant card, that shows loyalty to your brand and increases the value of the brand’s good will, so shareholders are happy
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