The newest trend: Will e-commerce kill credit cards?

Retail experts say as more shoppers do their shopping online, they have said goodbye to popular brick-and-mortar stores. Now, experts say they should start saying goodbye to the credit cards that go with them, as consumers favour credit cards that offer rewards for shopping online.

The rapid growth of online shopping has led to store closures, meaning many consumers are now physically far away from their favourite retailers. And with that, the credit cards they opened at those stores are less useful, and consumers stop using them as often, according to a recent report Moody’s Investors Service. These cards are often “combined” credit cards that carry a retailer’s name but are issued by a bank working with a major card issuer such as Visa or Mastercard.

“It is a pure numbers game. You only have 50 people coming through your stores, you will not get the same number of people signing up,” said Nick Clements, the co-founder of personal-finance company MagnifyMoneyThere were more than 60,000 cuts to retail jobs in February and March, the two worse months for retail since the end of 2009, according to the Labor Department. There have been more than 3,500 store closures so far in 2017. Big retailers like Macy’s J.C. Penney and Sears closed up their stores.

According to MarketWatch, customers will simply forget about the card and the store, and stop paying their remaining balances, said Jody Shenn, a vice president and senior analyst at Moody’s

“The balance on the card for the store you no longer go to falls to the bottom of the list of things you put your available funds towards,” he said.

U.S. Bank announced a new credit card in April, the Altitude Reserve Visa Infinite Card, that offers triple points on any purchases consumers make through a mobile wallet, including Apple, Samsung Pay, Android Pay and Microsoft Wallet. And Chase offers three points per $1 spent on shipping on its Ink Business Preferred credit card, a card for business owners.

It is possible brick-and-mortar retailers will change their strategies and offer more benefits on their store cards for online shopping to persuade consumers from canceling their cards, said Conor Keenan, the vice president of marketing at CompareCards.com, a credit-card comparison website.

Fewer retail credit cards may not be a bad thing. Consumers may be able to turn the dwindling number of store credit cards into a higher credit score, said Mike Cetera, a credit-card analyst at personal-finance website Bankrate. Many retailers’ credit cards have high interest rates compared with general-purpose credit cards, and have low spending limits, he said.

That is why credit experts often recommend store cards for consumers who have low credit scores, because they are just starting to build a credit history or have a damaged score.

A TJ Maxx rewards card, for example, has an annual percentage rate (APR) of nearly 28 per cent. The average rate for all credit cards, according to Bankrate, is currently about 16.5 per cent.

More cards can also help consumers manage their “utilization ratio,” the amount of total credit available that consumers are using. This plays a big part in calculating credit scores. Personal-finance experts recommend using 30 per cent or less of one’s total available credit. And if the retail credit card has no annual fee, it would not hurt to keep it.

If a consumer has a spending limit of $500 on a retail credit card, it becomes easy to exceed the 30 per cent rule on that card, he said. Utilization ratio takes into account all forms of credit a consumer has, though, so if consumers have multiple cards, using more than 30 per cent on just one card is not a huge problem, he said.

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