The single purpose credit card is a credit card that can be used in only one store, since these cards have limited usage.
These credit cards are given by the stores. This credit cannot be used at any other store. But, if a store has a chain or of other stores, the card can be used in other stores.
Many departmental stores and gas chains issue such credit cards
Examples: Few companies that offer a single purpose credit card are:
- Home Depot
- JC Penney
- Old Navy
Rate of Interest of Single purpose credit card
The nature of paying interest is similar to the regular credit cards. The only difference is that this card cannot be used in any and every store. These credit cards offered by the stores make shopping easier and tempting, firstly, by giving goods on credit and secondly, by offering various discount schemes, for those who use the card. Often the interest rates charged on ‘single purpose credit cards’ are more than the ‘general purpose credit cards’. This is how the companies make their profit.
Advantages to the Store
- Increased Sales: Customers using single purpose credit cards do not have to pay for the purchase, each time they go shopping.
- Prevents Consumer Flight: Customers are attracted to the discount schemes and they prefer buying from this store only.
- Increased Profits: With the increase of the sale of the goods the store makes good profit.
- Reduced Losses: As the store gets the scope of selecting goods as per their consumers taste, this reduces the chances of losses even when goods are sold on credit.
Advantages to the Consumer
- Schemes and Discounts: They can avail discounts and schemes.
- In Times of Cash Crunch: If he is out of money, he can use the card and purchase whatever he wants.