Perks with a price: Specialty stores reward loyalty
By Lucy Lazarony • Bankrate.com

More and more specialty retailers are introducing store cards and pouring on the perks to keep those "very special" customers coming back for more.

"Even though we might not like it. They're in it for the money," said Joanne Budde, executive director of Consumer Credit Counseling Service in San Francisco. "And they know how to hit our hot buttons."

Banana Republic privileges
Take Banana Republic, which launched a store card program Nov. 9. Privileges exclusive to cardholders include: Free alterations on all regular-price merchandise; a specialist to help with wardrobe planning and gift buying; a $15 award certificate for every $500 charged through 1999; updates on new merchandise, special offers and store events, and a 10 percent discount on the first purchase.

But all the pampering aside, consumer experts point out that specialty store cards are a lousy deal for people who carry big balances because of the cards' sky-high annual percentage rates, often 20 percent or higher.

"If you pay the minimum payment every single month you'll pay at least double for the purchase," Budde said. "You should always pay more than the minimum even if it's just $10."

On the flip side, people who pay off their bills every month may enjoy the extra services and personalized discounts that come with the cards.

"They know what you buy and when you buy," said Bob Lime, an associate with Linthium, Md.-based First Annapolis Consulting. "They know when your birthday is, so they can send you a birthday coupon."

Stiff competition
In these days of widespread credit, retailers had to get more creative in their store card programs. A plain old store credit line fails to entice customers because, as Lime points out, "These days anyone can get credit."

And industry competition for good credit card customers is stiff -- especially with so many general purpose credit cards out there offering rebates and rewards.

Some stores such as Eddie Bauer and Ann Taylor have opted for cobranded general purpose credit cards.

With the Eddie Bauer MasterCard, customers earn 3 percent rewards with each purchase made at an Eddie Bauer store or through an Eddie Bauer catalog and 1 percent rewards on all other purchases. The rewards go toward certificates good for free Eddie Bauer merchandise.

Ann Taylor Visa card customers also earn reward dollars for every purchase made with the card. They earn 4 percent rewards on each purchase made at Ann Taylor and 1 percent rewards on all other purchases. Customers receive a certificate every time they have reached $20 in rewards.

The cards carry a lower annual percentage rate than other store cards. The Eddie Bauer MasterCard comes with 17.5 APR or a 14.9 APR, depending on a customer's credit. The Ann Taylor Visa card comes with five-month 5.9 introductory APR and a fixed rate of 17.9 thereafter, while students receive a 9.9 introductory APR and a fixed rate of 18.9 thereafter.

Repeat customers
Regardless of the structure of the program, people should realize that the aim of any retailer card program is to spur spending.

"The object of any private label card is to get you to make three to five visits," said Gary Shafferman, chairman of Retail Credit Solutions!, a consulting management company in Dallas, Texas. "You have to get people in the habit of making purchases."

With all the sales and hoopla, it takes a bit of discipline to check spending. It's easy to get carried away snapping up one exclusive bargain after another.

"People come to our workshops and say: 'How many pairs of black pants do I need? But I bought them anyway because they were on sale,' " Budde said.

Purge the wallet
In addition, people should be aware that any unused store cards sitting in their wallet have some negative consequences as well.

"Close those unused and open store cards. They'll reduce the amount of available credit that you have when you go to buy something big like a house or a car," said Steve Rhode, president of Debt Counselors of America. "There's no reason why people need 10 store cards."

And Budde pointed out another reason to get rid of those unused store cards: The more credit cards a person carries, the more likely they are to impulse buy.

"We always tell people if you really want to get ahead (financially), carry one or two cards."

-- Posted: Dec. 14, 1998