246 Chapter 11 Customer Service Strategies Some businesses extend credit by accepting debit or credit cards from their customers. It may be preferable to accept bank cards, such as MasterCard and Visa. An advantage of accepting these cards is that the responsibility for collecting the money owed for the purchase is transferred to the fi nancial institution instead of the retailer. The bank pays the retailer for the customer’s purchase and collects the money owed for the sale directly from the customer. This service is not free for the retailer or the customer. For the retailer, the bank adds a service charge to each purchase made using one of its debit or credit cards. For the customer, he or she must pay monthly interest on unpaid balances to the bank that issued the credit card. If the retailer sells big-ticket items, like appliances or cars, consumer credit may be offered in the form of an installment loan. An installment loan is a loan paid in regular payments, or installments, usually with interest, until the loan is paid in full. Installment loans may be secured loans. Secured loans require collateral, or assets pledged to guarantee that the loan will be repaid. If the loan is not repaid, the asset can be taken by the creditor. The asset is then sold to cover the cost of the loan. Most retail loans are not secured, but do require that the customer qualify for credit. Extending credit to customers is beneficial to retailers. The most obvious benefit is the generation of sales. Offering credit through proprietary credit cards, bank credit cards, and installment loans can create a steady income for the retail business. Research shows that people will often spend more money when using credit than if they are paying cash. Another benefi t of extending credit to customers is building customer loyalty. Customer loyalty is the continued and regular patronage of a business, even when there are other places to purchase the same or similar products. There are many reasons that customers are loyal to a business, but one of the reasons is convenience. Customers appreciate using a bank card for in-store and Internet purchases. Businesses that offer customers credit tend to generate more sales than if they only accepted cash. A car loan is an example of an installment loan, with monthly payments. wavebreakmedia/Shutterstock.com