Give consumers some credit

Adding to the spate of loyalty initiatives emerging in the past year, credit card provider Barclaycard has launched a retail reward scheme that lets its cardholders earn cash rewards whenever they use their Barclaycard at a participating retail outlet.

The loyalty programme will go live in March and as many as 30,000 outlets have been invited to participate.

Barclaycard’s eight million card holders don’t have to do anything to join Freedom, they will automatically start collecting rewards free of charge, and then it’s up to them as and when they cash in the reward against a purchase.

Retailers such as Tesco, the Co-operative Group and Sainsbury’s have all showed a focus on CRM based marketing to give customers added value during the recession and Barclaycard claims that because its scheme is open to small and medium sized retailers, it is supporting the high street and customers when they need it most.

It’s been trialled in Northampton where small retailers have found that it allows them to give something back to their loyal customers, which they wouldn’t have been able to do previously.

There is also no need to carry around and remember a second card as the loyalty scheme will be built in to the existing chip in the card, and retailers don’t need to install an additional scanners or technology at the point of sale as it operates via chip and pin readers.

Sarah Newman, the managing director of the Freedom programme, says that the scheme incorporates the “best elements of other reward schemes” but without the trouble of collecting vouchers, or converting points into monetary rewards as the scheme already offers customers instantly redeemable rewards in pounds and pence.

So on all these levels Barclaycard Freedom is a winner, and so are it’s customers and the retailers that sign up to join the Freedom programme.

However, where it slips into darker territory is that it’s essentially a scheme to encourage consumers to spend on credit.

Not something that I can fully support when there are more people than ever in debt and we are still suffering at the hands of a recession.

The high level of debt in this country is often blamed on the availability of easy credit, which encourages people to spend above their means.

It’s only a good thing for those people who are able to, and do manage to pay off their credit card at the end of each month, therefore incurring no interest or late fees on credit card purchases.

Barclaycard Freedom is offering around 1% of the transaction back, which translates to claiming back £1 in every £100 spent on a Barclaycard.

So essentially, for every £100 spent at selected retailers, customers can claim back £1.

As far as I could see on its website, Barclaycard’s lowest APR is 7.9% so for every £100 spent on its Simplicity credit card, the annual interest is £7.90. Over the course of a year, for every £1 reward, unless you pay the bill in full, you are likely to end up paying 65p of it back to Barclaycard in interest payments.

Probably not worth the £1 “reward” when you could have paid on a debit card or cash and not run the risk of overspending and paying interest on your purchases.

While it is an added bonus for existing Barclaycard holders that manage their credit effectively, I can’t help but worry that the added incentive might cloud the reality of the interest incurred on credit.

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