“Always read the small print” – it’s a steadfast rule most of us know, yet choose to ignore. Some have learnt the hard way, signing up to online services, buying goods and services or insurance, only to get a nasty surprise because the small print wasn’t checked.
In today’s world, it seems that every clothing store, bank and food chain offers some form of rewards card that awards the buyer ‘points’ every time they use the store’s services. It then follows that these points, once they have accumulated to an acceptable level, can be used for discounts on future purchases or can even be traded in directly for cash. Almost seems too good to be true, right?
Some Hard Truths
The fact of the matter is that these outlets would not be offering rewards cards if there was even a remote possibility that they would lose money. In much the same manner as casinos proffering free credit to first time gamblers, these stores first look to draw you in by offering an enticing deal.
A good example in this context would be the clothing store that offers you a rewards card in which your first six months of using it are free. When considering such an offer, there seems to be no downside as you are simply racking in discounts whenever you use the card. However, this free discount card will have several subtle effects on your spending habits which you might not even notice at first. For instance, you will, in all likelihood, slowly begin to shop only at the store where you can use your discount points, and in all likelihood you may also start buying more than you need in the pursuit of maximizing the ‘benefits’ of the apparent bargain on offer. These are admittedly minor issues, however, after the initial free period ends, it becomes increasingly important to have read the small print.
The Hidden Extras
Although rewards cards and other free offers are useful to stores in attracting a consistent client base, the hidden extras embedded in the small print of the contract is where the real money is to be made. Most offers which include a free initial period will have a clause that, unless the customer specifically states otherwise, the account will continue at the end of the free period at a nominal monthly fee. Although it’s easy to cancel such a deal, the apathy of human beings should not be underestimated. These stores bank on the fact that most people can’t be bothered to go into the store and cancel the deal themselves, especially when the monthly fee is so low. Furthermore, most stores will offer add-ons to the initial deal, such as life cover to pay the account if you die and other small benefits, all of which really add up when viewed in a broad context. For example, let’s say that the package costs you a miserly R50 per month. When one considers that the store potentially has over 2,000,000 club members, their annual income for the “free card” is R1, 200,000,000 before the store even sells a single item of clothing. To put this in perspective, that is enough money to build 5 Nkandlas or even deliver basic services to countless underpriviliged communities.
People should never be sucked in by free offers unless they are absolutely certain that they will still make use of the rewards card or offer in the long run when monthly fees actually become payable. If you are currently sitting on a host of dormant rewards cards that you ‘might’ use one day, understand that you ultimately stand to make a loss on the deal and that it might just be a better option to brave the admin and get the card cancelled!