Store credit cards often cost less and are valuable in giving the business access to customer data. Personalized cards can benefit both large and small businesses. Before you go inviting your customers into an elitist group, consider the pros and cons cards have on a business, develop your lending standards, and determine what kind of rewards program you will offer.
When you offer a private store credit card, you enter into a financial agreement that is profitable for the business and the customer. Accepting private cards is more cost-effective for your business than other cards which often come with associated fees. It has also been proven that shoppers who shop with your card will spend more than they normally would. However, you will spend extra time processing and paying additional fees if a customer defaults on their payments.
Before issuing a store credit card, it is important you determine a customer’s credit worthiness. This will protect your business and the customer from defaulting on payments. The lending standards you develop will help you determine whether you want to issue a card or not. Consider the individual’s character, capital, collateral, and credit history. If you find them not eligible for your card, you must notify them. You have to give at least four reasons for denying an individual credit. Ultimately, this will help them improve their financial health.
Many store credit cards are rendered useless if used anywhere outside of your store. If you have the card co-branded with a major card company then the customer can use them for any purpose. Now you have to determine what kind of rewards program you can offer. Can you give an initial incentive like a store discount for signing up for the card? As the customer spends, determine if you will offer discounts based on what they spend in your store or what they spend elsewhere. You need to make the rewards program generous enough that opening a new line of credit is worth it.
Issuing a store credit card can help build and market your business. However, there are many elements you must consider before issuing cards. Consider the pros and cons of store credit cards for your business, develop cost-effective lending standards, and determine what reward programs you can offer your customers.
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