Limited purpose cards can be defined as a type of a credit card which can be used at a store or in the chain or stores or more specifically ate particular locations and for specific purposes only. These cards are easily available in the market and are honored by the store or its chain. These cards have evolved from stores which used to provide good on credit to their customers and maintained different accounts for the same. With the increase in the good purchased on credit, the stores started issuing limited purpose cards. These cards are not usable on any other store unless the other store is a chain of the issuing store. Popular examples of such cards are departmental store cards and gas cards.
Limited purpose cards
Limited purpose cards are similar to that of all-purpose cards however; the only difference is that these cards can be used at a single store only. Many benefits are offered on these cards which include the convenience of shopping easily and anything in the store along with various discount offers to those who are using the card. However, when all seems to be good, there is an underlying fact that the rate of interest charged on these cards are relatively higher as compared to other regular cards since this is the way the store earns through their cards.
Benefits of Limited Purpose Cards to the store -Increased sales volume: These cards allow customers to simply purchase whatever they want from the store and repay the amount ate a specified time period. Moreover, many discount offers are also included in the card which tends to attract more shoppers thereby increasing sales volume.
-Increased profit level: With the increase in sales volume the profit level increases automatically. In addition to this, earning through interest payments is also accelerated from defaulting parties. The traditional process of providing goods on credit lacks this feature.
-Decreased losses: When a store displays goods which the customers are willing to buy on credit, it can easily reduce its losses even if those goods are sold away on credit. For instance, if limited purpose cards are issued to be used for grocery items only, the fact is that customers will buy limited grocery for the entire month and hence, not much amount of the store is stuck within these items. Most of the time, the store will receive payment from customers prior to the due date and if not, it will earn through interest charges from the defaulting customer.
Benefits of limited purpose cards for the customer
Discounts and schemes: Cardholders are usually offered different discounts and schemes when shopping within a certain category of products. Consumers have the opportunity to make the most of it through spending less on the goods or by receiving free goods.
Cash crunch conditions: In case, a customer is out of cash, limited purpose cards can be used to buy goods and not paying for it at the same time. When he has sufficient funds, he can pay for it later.