Clueless store card promoters still thumb-suck rates
By Angelique Ruzicka, editor, Moneybags.co.za
If a consumer gets into debt I am of the opinion that they should be entitled to know exactly what they are in for. This means that they should know what interest they are being charged, the costs involved of maintaining that particular account and they should be informed of any penalties if they make late payments.
However, I found for the second year in a row that consumers are often left in the dark when it comess to opening store cards. This year I found that again store card promoters are woefully clueless in informing consumers about store card interest rates and fees. But the benefits are often pointed out and these promoters can often recite them by heart.
It is just before Christmas, when shops are at their busiest, and people are guilt-tripped into buying an expensive present for friends and family. It’s a time when, I believe, consumers are at their most vulnerable and which is why in the second year of Moneybags’ existence I again consulted these promoters about fees and interest rate charges.
The results were disappointing. In a trawl of ten Cape Town based fashion retail stores that offer store cards, seven out of ten promoters didn’t know what the interest rate charges were on the store cards or provided Moneybags with the incorrect rate. Only three shop assistants could correctly answer questions about interest rate charges and fees associated with opening the store accounts. This was slightly better than last year’s survey where only two shop assistants could correctly answer all the questions put to them by Moneybags about important details like interest rates and late payment charges.
Opening up a store account is expensive considering the interest rates that people pay. So I find it very concerning that few store promoters know or can correctly state what the interest rate charges and fees are for opening these accounts. Some store card administrators charge a card maintenance fee and an initiation fee. On top of that they often ask consumers to take out card protection insurance, which they say is compulsory. So on top of paying interest charges (usually 21%) you could pay as much as R178* in fees depending on how you use your card and that’s excluding the insurance.
There was no consistency with last year’s findings. For example: A Woolworths employee working at the customer enquiries desk didn’t know the interest rate and charges of the card this year but last year a Woolworths employee correctly stated the interest charges. Worse still some promoters hazarded a guess as to what the rates could be. I found this out when I queried the facts with each stores’ customer call centres or PR departments.
But would a consumer have the time or even bother to go to such lengths before they sign on the dotted line? Probably not. I found that store card promoters were most persuasive about the benefits of opening a store card and some were even prepared to wait while I filled out the application form to get “instant approval”.
This lack of information certainly doesn’t bode well for a country that has nearly half of it’s credit active consumers with impaired credit records. In September this year, the National Credit Regulator said the number of consumers with impaired records increased from 9.53 million to 9.69 million, an increase of 161,000 when compared to the previous quarter.
In my opinion, store cards should be avoided if you are not good at managing your money. But if you are disciplined they could work for you. Some have six month revolving plans that don’t charge you interest on your balances. But if you don’t pay your outstanding amount off within six months then you will be charged interest.
I say avoid store cards because they are expensive compared to other lines of credit such as credit cards. The average store card charges 21%, which is the maximum prescribed under the Regulation 42 of the National Credit Act. If I had to buy something on credit and had no other option I would rather use a credit card from a bank than a store card. Generally the interest rate charged on a credit card is much lower than a store card. But like store cards, credit cards also only work for you if you pay them off in full and if you are disciplined.
There is an easy solution to this problem – increased transparency. Perhaps if store card promoters made consumers aware of the cost of opening up a store card account they will be able to make better decisions in the way they manage their finances. Of course more needs to be done to help those who get into debt as I am sure there will be those who, even if they were armed with the information, would still take out a store card regardless of the fees, rates and cost of insurance.
I think making people more informed of the costs instead of just giving them the benefits of the account will empower them more and go some way to combatting the debt problems we face in this country. However, educating the consumer to even this level will take some time. It is, after all, the second time we’ve come across store card promoters thumb-sucking rates.