Store credit cards get upgrade

By Jeremy M. Simon

Luxury retailers hope upgrading the rewards offered by their store credit cards will bolster loyalty among their biggest-spending customers.

In late April 2007, Nordstrom unveiled a "tiered" rewards program that allows customers to earn perks when they spend enough on their Nordstrom credit card, debit card or check card at the store.  Rewards include free shipping, packaged trips and access to "red carpet" events and store openings.  Previously, Nordstrom cardholders earned spending credits in the form of Nordstrom Notes.

Meanwhile, rivals Saks Fifth Avenue introduced a Saks World Elite MasterCard in the fall of 2006, allowing shoppers to earn points for spending outside the store toward perks such as free fur storage. 

Also, Neiman Marcus is offering its InCircle rewards members the opportunity use 5 million points for the purchase of a Lexus automobile.  The store is also testing a credit card that allows shoppers to earn points for spending outside Neiman Marcus stores. 

While InCircle program shoppers generally earn one point for every dollar they spend, the point-earning formulas become more generous at higher tiers.  In an effort to keep rewards fresh, Neiman updates them each year.  InCircle rewards include perks such as trips, designer clothing and cars.

Such strategies involve an attempt to boost profits from their leading 100,000 to 200,000 top spenders, instead of working to gain new customers.  The facts seem to support this approach.  Consulting firm Customer Growth Partners reports that the top 100,000 Neiman Marcus customers spend over $12,000 annually at the store, compared to an average of around $600 a year from other customers.

Consumers who wish to take part in a retailer's program need to first apply for a store credit card.  Unlike traditional store credit cards, points can be accumulated much faster on the new cards, since they cam be used anywhere.

However, these credit cards are a danger to shoppers that regularly revolve a balance, since their interest rates often reach 18 percent or higher.  And, some of the rewards are simply discounts on travel or other offers.

Additionally, with many programs, reward level is based on calendar year spending, meaning that shoppers need to re-qualify again each January.  Furthermore, certain loyalty programs only permit the redemption of points once a year.   

Although most stores automatically redeem points for gift cards or spending certificates that are sent to customers at the end of the year, a few stores will send them more frequently upon request.

Therefore, for many consumers who are seeking perks, a nonstore reward credit card is probably a smarter choice.

Published: May 14, 2007

	Three most recent Reward programs, cash back cards stories: Credit card rewards can trim the sales price of cruising – Sure, you want to cruise to distant shores, but you don't want every dime pirated away. Special rewards cards and programs can smooth out the financial seas ... Rewards points auctions offer once-in-a-lifetime experiences – Whether it's attending the Super Bowl or the Oscars, hanging out with celebrities, or enjoying an all-expenses-paid vacation at a luxury resort, you can probably find someone auctioning it off for reward points. Here's how they work ... Chart: Compare and find the best gasoline rewards card for you – Finding the most-rewarding gasoline credit card can limit the damage of rising gas prices -- and keep you from fuming ...

	CreditCards.com's newsletter Did you like this story? Then sign up for CreditCards.com’s weekly e-newsletter for the latest news, advice, articles and tips. It's FREE. Once a week you will receive the top credit card industry news in your inbox. Sign up now!