Retailer credit cards - usually a last-minute incentive signup offered at the till - have generally been discouraged. While they often pack on-the-spot discounts, freebie periods and other extras, their higher-than-usual interest rates, rigid terms and inflexible usage (you can only use them with one retailer, after all) mean they're generally shunned by savvy credit card users.
But it appears store-offered credit cards are experiencing something of a resurgence, as some big retailers like Amazon have been able to offer credit cards with rewards that rival the best in the market. Take for example the giant online retailer's new Prime card, which offers a whopping 5% cash back. It's only offered in the U.S. right now, but a Canadian counterpart offers 2% reward return on Amazon products and 1% on other spending. That's not too shabby.
Are retailer credit cards worth another look?
The Next Level of Loyalty
Similar to the U.S., retailer credit cards are a developing segment Canadian consumers can take advantage of. “Yes, retailers are becoming more and more active in the loyalty space and credit cards can be an integral part of building and maintaining a loyalty strategy,” says Heather Armstrong, director of Canadian Banking Communications at Scotiabank.
RBC holds a similar view: “Retailers have shown a willingness to partner with financial services as seen by the wide variety of retailer credit cards in the marketplace,” says Lena Wan, advisor of Corporate Communications at Royal Bank of Canada. “Consumers see the value of being part of a retailer credit card loyalty program and have many options to choose from now. We encourage clients to find a card that suits their needs and lifestyle along with any financial or rewards goals they may have.”
Who Should Sign Up?
So... Is it ever a good idea to get a retailer credit card? Put it this way: you really have to love shopping there.
“Consumers may wish to sign up for a retailer credit card if they are loyal to a specific brand and make regular purchases at that retailer,” advises Wan. “These types of credit cards typically offer cardholders an opportunity to collect and earn rewards or discounts at their favourite retailers while accelerating their points collection.”
Signing up for a retail credit card may not make sense unless you plan to use it regularly.
“A retail card is a smart idea when you are very brand loyal to that retailer or the product offers unique and otherwise unattainable in-store benefits,” advises Armstrong. “However, to get real value you need to dedicate a material amount of your spend to that card, which might not otherwise make sense.”
In some cases, there may be lender-provided credit cards that may make a better choice. Armstrong points to Scotiabank's popular 4x cash back programs on gas, groceries and dining, and there are many similar products offered by lenders that cater to broader spending habits.
The verdict: If you're truly a regular shopper, retailer credit cards can be a great way to earn rewards points and save some cash. Just be sure you don't carry a balance, as these cards can charge more than 10 per cent more after the grace period than similar options on the market.
Looking for a rewards credit card? You might like:
The Scotiabank Momentum Visa Infinite Card (4% cash back on gas, grocery, drugstore and recurring payments)
The MBNA SmartCash MasterCard Credit Card (5% cash back on all gas and grocery purchases within the first six months)
The SimplyCash Card from American Express (both no-fee and fee versions that offer up to 5% in cash back on purchases)
Sean Cooper is a Financial Journalist and Personal Finance Expert, living in Toronto, Ontario. He offers Unbiased Fee-Only Financial Advice, specializing in pensions and the decumulation of financial wealth in retirement. Follow him on Twitter @SeanCooperWrite and read his blogs and request his writing services on his personal website: http://www.seancooperwriter.com/