Australia’s Woolworths launches first financial product
Australian supermarket chain Woolworths, which reported a 26% rise in profit last year of A$1.6bn, has launch a credit card under the name Every Day Money.
It is the chain’s first launch since it decided to move into financial services under its new Easy Money division.
The card rewards people who shop in stores owned by the group, with shopping vouchers that can be used to buy a wide range of Woolworths merchandise.
The launch of the card has received much media attention, although there is some criticism that Woolworths are aiming to increase their domination of the retail space in a way that makes competition from smaller players almost impossible.
The card is branded MasterCard, and issued by HSBC Bank Australia. It will provide bonus points for spending in most Woolworths stores. That includes the group’s supermarkets, its Caltex co-branded petrol stations, Woolworths and Safeway Liquor, and Dick Smith Electronics Powerhouse. It is a standard credit card that can be used anywhere a credit card is accepted.
Woolworths chief executive Michael Luscombe says the premise of the card is to meet customer demand for “simple, easily achievable and useful rewards”. The card has a couple of innovative features. Cardholders will be able to check their credit balance and pay their account at the supermarket checkout.
Later this year cardholders will be able to start using a facility called epump for automatic payment at petrol stations. A card reader at the pump will pick up a signal from an antenna in the card, complete the transaction and automatically calculate any petrol discounts.
The HSBC-issued MasterCard has an interest rate of 18.99 per cent on purchases, up to 55 days interest free and a $49 annual fee. The fee is waived in the first year. The interest rate on cash advances is 21.99 per cent.
There is a zero rate offer until February next year and a 5.99 per cent balance transfer rate. The minimum monthly repayment is 2.5 per cent of the outstanding balance, or $30 (whichever is the larger amount). The over-limit fee is $35, as is the late payment fee.
The reward system
The reward program offers one point for each dollar spent anywhere, two points each dollar for purchases in Woolworths group stores and three points for purchases on Woolworths Select products, the company’s house brand.
Every four months points are converted to a voucher, called an Everyday Money Shopping Card, which can be used in group outlets. The voucher expires three months after the date of issue.
Woolworths did not detail the conversion rate from points to rewards but gave an example of a family accumulating 19,224 points over a four-month period and receiving a shopping card worth $110.
In another example, a family would accumulate 4218 points over four months and receive a shopping card worth $20.
Other retailers are waiting in the wings with their own financial products. Shortly to be announced is the American Express from David Jones for upmarket shoppers which will bolster its already successful store card.
Also expected is a financial product from Wesfarmers, which already runs its own insurance business, and the huge Coles Fly Buys scheme.