by Chow Penn Nee

SINGAPORE - Retailers here are using increasingly innovative means to get customers to spend more by extending credit. Courts, the furniture and electronic goods retailer, is now ready to give even credit cards a run for their money by undercutting them.

For some time now, Courts has been offering an in-house instalment plan for people who want to make big purchases. It has now taken this to a new level.

In its latest promotion - which ended only last month - it aggressively targeted selected customers who have made purchases at Courts using their credit cards.

In letters mailed to these customers, Courts offers to give them the amount of the purchases back in cash, as long as they switch to the Courts in-house instalment plan called Easy Access Max. So, if you've spent, say $3,000 at Courts using your credit card, after meeting with an officer to discuss the payment plan, Courts will give this amount back to you through a cheque to pay off your credit card, and then sign you up for the Courts monthly instalment payment plan.

Customers are incentivised to do so since credit card interest charges on rollover credit come up to about 24 per cent annually. In the letter, Courts says that customers will be looking at an interest rate of 19.9 per cent payable over a 36-month repayment period if they switch to their in-house instalment plan. This incorporates a promotional offer of zero per centinterest for six months. This instalment plan is not regulated by the Monetary Authority of Singapore as Courts is not considered a financial institution.

The promotion is open only to those who have no legal proceedings against them, and is subject to internal criteria, Courts spokesperson Tammy Teo said.

According to Courts' website, its instalment plan - Easy Access Max - gives up to 10 times your monthly salary. No minimum income is required and customers have up to five years to repay the amount. Courts uses its internal checks and criteria to determine who is eligible for the plan, said Ms Teo. 'So far, the response to the instalment plan has been encouraging,' she added.

Courts seems to raking in a substantial part of its revenue from its financing operations.

According to the company's 2007 annual report, revenue from earned service charges (which includes money made from Easy Access Max) was $48.6 million. This accounts for about 14.6 per cent of Courts' total revenue of $333.4 million.

Kuo How Nam, president of Credit Counselling Singapore, noted that this is not a new line of business for Courts and advised that people looking into this scheme should consider the interest rate and be mindful of debt servicing ability. 'This may tempt them to put it on instalment plan,' he pointed out.

Leong Sze Hian, president of the Society of Financial Service Professionals, which volunteers financial counselling for bankrupts, added that additional credit lines would enable one to increase credit limits. 'What if other retailers decide to do the same? There will be a quantum leap in credit availability,' he said. 'Seeing that credit card debt and rollover debt are at a high, this might lead to more financial stress.'

Separately, Courts' majority shareholder, Singapore Retail Group (SRG) is seeking to delist Courts from the Singapore Exchange (SGX), subject to shareholders' approval. SRG cited the low trading volume of Courts' shares, as well as an undertaking to review and restructure the company, as reasons for going private.

This article was first published in The Business Times on July 19, 2008.