Can supermarket cashiers selling expensive credit cards be a good idea?
Away from the hurly burly of the credit crunch and general global financial meltdown, news emerged this week of yet another store card rip off. Argos, together with sub-prime lender Provident Personal Credit, launched the Easy Shop Card, complete with eye-watering interest rates.
This card, even down to its name, is like some kind of sick parody of everything that is wrong - in fact the very dynamic that has brought the financial markets to their knees. Easy credit that encourages us to spend money we don’t have. The fact that the card is backed by a sub-prime lender gives the whole thing a kind of twisted symmetry that is hard to believe.
The Easy Shop Card is designed to make it easy for Argos customers to borrow between £100 and £500 and then blow it all in-store. The thing is, the card charges interest of anywhere between 183.2% and 222.7% APR. To put that in context, on average standard credit cards charge an APR of about 18% on purchases (cash withdrawal charges are much higher). Even on the main website for the card an example states that a customer borrowing £300 could end up paying back over £500.
Call me a cynic if you must, but to me this card seems entirely designed to tap into what remains of our desire to access easy credit so we can go on spending – surely it’s just a coincidence that Christmas is just around the corner?
It’s unfair to single out Argos of course, though this particular card is surely amongst the most expensive. Go to pretty much any supermarket (indeed most retailers) and you will no doubt be asked if you would like to sign up for a store card. To be clear, these are different from the credit cards linked to some retailers, which may be backed by companies such as Barclaycard and Visa (e.g. the Easy Shop card should not be confused with the Argos branded MasterCard, which has an APR of ‘only’ 18.9% on purchases). Until recently store cards were largely backed by one company – GE Money, you guessed it, a sub-prime lender - and are often linked to in store promotions (Like 10% off your first bill, or money off a particular product).
The worrying thing for me is that cashiers are incentivised to sell store cards. They have targets to meet linked to extra pay, or even just keeping their jobs. But are they properly trained to sell credit cards fairly? I can’t say for sure, but I’ve seen enough evidence with my own eyes to suggest not.
Anyone selling credit cards is obliged to give certain information about the cost of the card – indeed store card providers are obliged to tell us that cheaper alternatives exist. But I’ve seen precious little of this information actually being given out at the checkout (doubtless the retailers would point out that their leaflets set this out, but is that enough?). A standard exchange goes a little bit like this:
CASHIER: Do you have a SuperDooperMarket card?
CUSTOMER: No, what is it?
CASHIER: Well it’s great, you get lots of rewards and things. Let me give you an application form...
The rather obvious and glaring omission there is any mention of the words 'credit card' and 'interest rate'. In fact, on that basis, it all sounds like a harmless reward card. Of course, it isn’t. You only get those rewards if you spend money on the card and, therefore, pay the interest. I assume most people know that, but some people undoubtedly will not and it is they, who can often least afford it, who are most likely to sign up to these cards. That can’t be right can it?
I don’t blame the cashiers themselves. I would question how much training they get on how to sell and what the rules are, not to mention the basic morality of giving them pay incentives to push cards that are essentially a rip off.
I’ve checked with the Office of Fair Trading and Trading Standards and there are regulations about how these cards are sold. Certain information must be given out about the cost of the card and such. The point is that these regulations are not enforced proactively, but only when complaints are received.
So what can we do? In short, complain. Next time you see a cashier pushing a store card but giving a misleading impression of what it actually is, by omission or otherwise, take the five minutes required to complain to the customer services team. If you don’t get any joy there, call your local Trading Standards office.
It may sound petty and moany, but these regulations are in place to protect all of us – however they do nothing if we don’t enforce them ourselves by pointing out dubious practices – only then will they be investigated.
