Shop Card, Understand the Components

By: EconomyWatch Content Team   Date: 9 February 2010

About The Author

EconomyWatch Content Team

The Economy Watch Content Team manages our thousands of reference pages on economic, industry,

EconomyWatch, Content Team

 

  • Dot Div
  •      

When you hear of a shop card, it is a reference to a merchant card, retailer card, charge card, or POS (Point of Sale) card.  A card such as this is similar to a credit card but with several differences.  Companies such as JC Penney, Sears, Macys, and other such companies offer a shop card that allows consumers to visit stores in person or online and shop for merchandise sold.  However, just as with choosing a standard credit card, it is also important to find the shop card that is going to be the most advantageous.

A shop card is a plastic card that gives consumers an alternative means of paying for purchases other than with cash or a standard credit card.  As with a credit, a shop card requires the cardholder to go into a legally-binding agreement with the issuing company.  This agreement would outline each aspect of the card to include interest rate, fees, grace periods, discounts, and so on.

Whereas a credit card or debit card could be used at any store or with any merchant, regardless of industry, the shop card would be specific to the company.  In other words, someone with a Visa or MasterCard credit card could shop at Penney’s, Macy’s, or Sears using the same card but someone owning a Sear’s card would only be able to use the shop card at Sears.

Another important aspect of securing a shop card is that instead of getting one from every merchant possible, it would be wiser to secure a card only with one or two preferred retailers.  The reason is that these cards are also reported to the three reporting credit bureaus and when a person has too many cards, it is reported and scored as negative, even if the balance is zero or the card is paid on time each month.

The very first shop card was in 1914 but at that time, it was actually printed on paper.  Then in 1957, the Diners Club card was invented when a man by the name of Frank McNamara went to eat at a diner but forgot his wallet.  He made a promise to come back and pay, which he did but he also developed a standard credit card that would not make other people in his position feel embarrassed.

With the development and offering of the credit card, more and more retailers started to create their own version with the shop card.  When this happened, sales skyrocketed, which was great for the merchant but also the consumer in that they had spending flexibility.  For many years, people were responsible with their shop card so no problems existed but over the past 10 to 15 years, more and more people were spending but then not paying the balance off, which created a financial mess for the merchant and the consumer.

As spending on a shop card has continued to expanded and new challenges have been seen, the federal government recently passed a new bill for a law that will go into effect in February of 2010.  With this, applicants wanting to secure a shop card would be closely scrutinized, meaning fewer people would get approval.

However, financial experts do not believe this will have a negative impact on the merchants in that the people getting the cards and spending money also have the financial means to make payments on time.  Therefore, while changes have been seen with the shop card, they are good changes.


  • Dot Div
  •      
blog comments powered by Disqus