There’s a new way to buy your Hemnes dresser, Ektorp sofa or Rens sheepskin rug.
On Tuesday, the company announced the Ikea Visa V, +0.03% credit card. It will offer 5% back in rewards on all Ikea purchases, including the Traemand brand kitchen installation and at-home assembly services through the errand service TaskRabbit (which Ikea owns).
But infrequent Ikea shoppers may be able to take advantage of other rewards. The card also offers 3% back on dining, grocery and utility bills — on par with some other popular reward cards, including the Sam’s Club Mastercard, which offers 3% back on dining and travel, and the American Express Blue Cash Preferred card, which offers 3% back at U.S. gas stations and some department stores.
But there is one major caveat: The Ikea card isn’t offering cash back that can be used anywhere. The rewards must be exclusively redeemed at Ikea. What’s more, it charges a relatively high interest rate of 21.99%. The average credit-card interest rate is 16.94%, according to personal-finance website Bankrate.
On the plus side, the Ikea credit card has no fees, and unlike some other store credit cards does not charge “deferred interest,” a model that is often confusing and potentially expensive for consumers. New cardholders will also get a $25 bonus toward their first purchase on the card. And all cardholders will receive free standard shipping and delivery for in-store purchases made in stores in the U.S. when using the card, through Aug. 31.
And the card may appeal to consumers who are new to building credit or need to repair their credit, said Jacqueline DeChamps, chief operating officer at Ikea U.S. “We’ve worked very hard to ensure our customers can have meaningful lines of credit,” DeChamps said.
The Swedish company is the latest well-known retailer to roll out its own credit card in recent months, as companies try to build loyalty and brand recognition among consumers. Apple AAPL, +0.55% is reportedly developing a credit card with the bank Goldman Sachs GS, +0.01% Uber and Amazon have also unveiled their own cards.
Uber’s card offers 4% cash back on restaurant, takeout and bar purchases and 3% on travel, while Amazon’s AMZN, +0.78% credit card — which is only for subscribers to the $119-a-year Amazon Prime program — gives 5% back on Amazon and Whole Foods purchases.
Ikea spent two years developing its new credit card, DeChamps said. The company partnered with data company Alliance Data to create the card, which is issued through Comenity Bank.
The credit card is one of a slew of moves IKEA has made to encourage customers to visit its stores more often, she added. Ikea also last year introduced a service called “Click & Collect,” which consumers use to buy items online and then pick them up in store. That service costs $5, but consumers receive a $5 Ikea gift card they can use for future purchases.
Of course, credit cards can put consumers in danger of overspending. Consumers who do not pay their credit-card bills in full each month can pay hundreds in interest and create a debt that is hard to escape from. Americans collectively have more than $1 trillion in credit-card debt.