Credit options encourage flooring purchases

As the economy continues to slowly improve, trends in the overall economy in the U.S. are influencing the use of consumer credit for flooring purchases.

In fact, Equifax, one of the largest consumer credit reporting agencies in the U.S. reported that retail store brand credit cards are becoming more popular than bankcards. In a November 5 press release, Equifax reported, “Nationwide, new account openings for retail credit cards has rebounded from the recession much more so than bankcards.”

Retail card debt is growing while that of bankcards is remaining flat or rising slightly compared to the prior year, according to new National Consumer Credit Trends Report data from Equifax. U.S. retail card debt grew 7.05 percent while bankcard debt was up only by 0.37 percent at the close of the third quarter of 2013 compared to the same period in 2012.

“Consumers may be opting for retail credit cards because of the promotions, discounts and other perks they get at the register,” said Trey Loughran, president of Equifax Personal Solutions. “Other consumers are likely compartmentalizing their purchases — opening retail accounts to pay for larger purchases over time and using their bankcards for everyday purchases like gas and groceries to be paid in full each month.”

CCA Global Partners advises its members that store credit availability can help close a sale. “Retailers that do not offer financing options are at a distinct disadvantage as today’s credit savvy consumers have come to expect these types of options when making large purchases, regardless of the industry. The availability of longer term, interest free finance plans through our partnership with GE Capital allows our customers to select the flooring they truly want in their homes at a more affordable price,” said Bill Wissler, vice president, Strategic Partners Group for CCA Global Partners.

GE Capital reports strong year-over-year growth across its flooring programs, especially for residential replacement floor covering, according to Brian Copps, vice president of GE Capital’s Retail Finance Flooring segment. “This growth mirrors the latest findings of our second annual 2013 Major Purchase Shopper Study, which revealed that more than 41 percent of flooring shoppers are more open to making a major purchase than a year ago.

The 2013 GE Capital report surveyed more than 3,200 shoppers nationwide, comprised of nearly 2,220 GE Capital Retail Bank (GECRB) accountholders and 1,001 random shoppers who recently made a major purchase of $500 or more in 12 segments, including flooring. It found that while major purchase shoppers spent an average of 79 days gathering information, flooring shoppers had a longer research cycle of 137 days to evaluate available options online and make several in-store visits before ultimately buying (90 percent of flooring shoppers purchase in-store).

Seventy-seven percent of Capital Retail Bank (GECRB) accountholders said that having access to financing options drove their choice of retailer; and even higher with 83 percent for flooring cardholders indicating financing drove retailer choice.

Because most customers have a monthly budget that covers the essentials, many major purchases are advertised in terms of an affordable monthly payment, Copps noted. “Flooring dealers can help their customers plan how a purchase fits within their budget by breaking down a lump sum and presenting it as an estimated monthly payment,” Copps added. “Consumers appreciate options, including flexible financing, being able to spread out the flooring purchase over time, and having a dedicated line of credit for flooring purchases, which frees up their general purchase cards for everyday expenses and emergencies.”

To give consumers the comfort of a store brand credit card, TD Retail Card Services offers its Renovate Credit Card program, a revolving private label consumer credit card that can be used for purchases of products or services at any participating merchant. There are now more than 500 locations of independent home furnishings retailers across the U.S. and Canada, including floor coverings dealers that are now using the program.

Merchants opening the individual consumer’s account can have their store’s name embossed on the card. “Through economies of scale, the Renovate Card delivers many of the important advantages of a private label credit card to independent home furnishings retailers with single or multiple locations who may not generate the sales volume to justify a private label program of their own,” said John Piotrowsky, vice president, product manager, at TD Retail Card Services.

Retailers in the program can offer their customers a variety of special financing options, including no-interest, deferred-interest and low-interest programs with terms ranging from six months to 36 months.

Wells Fargo expects consumer spending to increase as housing and job markets continue to recover, according to Natalie M. Brown, APR, vice president, Consumer Lending Communications for Wells Fargo. “As those markets strengthen, we would expect to see commensurate spending on home-related purchases — like flooring,” she said.

TD Retail Card Services offers the Renovate private label credit card program.

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