Extending Credit to Boost Your Sales
Whether you agree with it or not, Americans are addicted to credit. Our economy would come to a screeching halt if suddenly no one could use credit to purchase goods or services. While small items can still be bought for cash, the trend continues to pay for everything with credit. Even small purchases like a hamburger at a fast food restaurant are paid for with credit cards. Larger items like cars, boats, televisions and appliances are usually paid for on credit. Stores or businesses with a generous credit policy are much more likely to be able to boost their sales.
There are many different ways a business can use the extension of credit to draw more customers to their location. Typically, in a retail environment, credit is in the form of accepting national credit cards such as Visa, MasterCard or American Express. Merchants sign up with the various credit card companies and pay a small percentage of the total sale to the credit card company when they conduct a transaction using a credit card. The convenience of being able to pay with credit when you do not have cash is a major reason why consumers have so many credit cards.
When a merchant accepts payment via a credit card, they are assured of getting their money from the credit card company. Even if the consumer does not pay the credit card company for the amount he or she charged, the behemoth credit card companies stand behind every transaction they approve. Not only does accepting credit cards increase sales, but it also reduces collection efforts for those that pay with a store credit card.
Speaking of store credit cards which can be used in a particular store, they encourage consumers to shop at a particular store. For instance, if you have a J.C. Penney or Sears charge card, you are more likely to shop at one of those stores than another store where you do not have access to credit.
Retail stores are not the only types of businesses that attract more customers by extending credit. Many professional services including attorneys, dentists and other professionals will have internal credit plans where they will perform a particular service and then the client can pay out the amount owed over an extended period of time. There are also special promotions such as having two years to pay off furniture, no interest loans and giving discounts if a loan is paid off early.
Extending credit to boost sales makes sense for most businesses. If you do not have a fairly liberal credit policy, many customers will go to one of your competitors where they can get credit. Most people do not have enough money to buy a car for cash and you will lose a potential sale if you can not help a willing customer get financing for the vehicle.
Stores need to check the credit history of customers who apply for store credit to make sure they are not too big of a risk. Once a customer establishes a relationship and credit with a particular store, they are much more likely to come back again and again and give that particular store their business.
Saving moeny and not abusing your credit card is essential if you are looking to manage your finances accordingly. As mentioned in this blogpost by Kanetix Online, it is always wise to compare quotes online through an insurance comparison service.
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