For the third year in a row Moneybags has conducted its annual store card survey and found that store card promoters are woefully inaccurate in informing consumers about correct store card fees and charges. With less than a week to go before Christmas, promoters were keen on pushing the benefits of store cards, but some aren't sufficiently informed or trained about interest rate charges or fee expectations as they should be.
In a trawl of ten Cape Town based fashion retail stores, that offer store cards, nine out of ten promoters didnt know what the interest rate charges were on the store cards or provided Moneybags with an incorrect rate. This was worse than 2013s survey where seven shop assistants got the interest rate figures incorrect. These insights were gained through the mystery-shopper method.
The South African Reserve Bank has increased the repo rate this year but this shouldnt serve as an excuse for store card promoters to give the customer the wrong information. A few promoters got very close to the actual figures including the ones from Mr Price, Foschini and Markham. But whether they were 0.5% or more than 1% out we had to mark them down as not knowing what the rate was. We feel its imperative that when someone is given credit of any kind that they are presented with all the facts accurately.
Opening up a store account is an expensive exercise but very few store promoters know or can correctly state what the interest rate charges and fees are for opening the accounts. Some stores charge a card maintenance fee; initiation fee and ask you to take out card protection insurance which they say is compulsory. So on top of paying interest charges (usually 22.65%) you could be paying a lot more in the month for the benefit of using a store card, said Angelique Ruzicka, editor of Moneybags.
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 dont charge you interest on your balances. But if you dont pay your outstanding amount off within six months then you will be charged interest.
Store cards are expensive compared to other lines of credit, such as credit cards. The average store card charges 22.65% in interest, which is the maximum prescribed under Regulation 42 of the National Credit Act. But banks can offer customers a cheaper rate on credit cards than what they would pay on their store cards depending on their individual credit scores.
We are not fans of credit. But if you are going to take on credit rather take on a credit card from a bank than a store card, especially if the interest your bank offers you is lower than 22.65%. 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, said Ruzicka.
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Moneybags has written to senior management of Woolworths, Edcon, Truworths, The Foschini Group and Mr Price to highlight this years findings as well as those mystery shopper surveys that weve conducted since 2012.
Most have responded to say that they do conduct thorough training of in store staff and call centre agents, and that they will continue to do so, and institute refresher courses. While this is encouraging to hear, the reality is that three years on, this method of training clearly doesnt appear to be working. With a proliferation of new store chains in South Africa it is more likely that it will get worse if new and better ways of treating customers fairly arent found.
While one person from ten stores should not reflect on the groups overall, it just takes one person to misinform many thousands of customers into thinking they are getting a better rate than what they actually get in the end. One call centre agent told me that the rate on the card was 1.65%. It was only after we queried this that she checked with fellow colleagues and realised the information she was conveying was incorrect, said Ruzicka.
Ruzicka added that the solution to this problem would be increased transparency. Moneybags is calling on stores to clearly display what their rates, charges and insurance costs are, alongside any deals that they promote. The time has come to be honest and accountable. Put the rate on wall behind the tills, if need be, and train staff to lead customers to the displayed information. Make store managers accountable for updating these signs. The time has come to replace ineffective cyclical training with something more pragmatic. Consumers have a right to be treated fairly and kept informed. Perhaps if consumers are more informed about this in writing they will be able to make better decisions in the way they manage their finances.
For more information or comments, contact: Angelique Ruzicka editor of Justmoney and Moneybags, cell: 0710 611 711 or email: firstname.lastname@example.org. To view the responses from the retailers on Moneybags mystery shop, click here.
In December 2014, Moneybags went undercover to ten shops that offer store cards at the V&A Waterfront, St Georges Mall and the Golden Acre in Cape Town. After mystery shopper exercise, Moneybags contacted PR departments or customer service departments of the stores to enquire if they knew what the interest rates and charges were. These were the results:
Moneybags is the sister website to Justmoney and provides advice, guides, deals and savings on financial services and retail products within South Africa. We have a single aim in mind: To empower the South African consumer to make informed and educated purchasing decisions. At Moneybags, we believe that being smart with your money is the best way to effectively increase your monthly income. We hope to create a community of people who are serious about managing their money, and to source the best quality merchants and deals across a variety of channels. For more, go to www.moneybags.co.za.