Check pros, cons of store credit card first
By JAYNE O'DONNELL
USA Today
No interest or payments for a year! 25 percent off purchase! Free gift cards!
The latest lures to open store credit card accounts can be alluring. Determined dealmakers can enjoy a myriad of special offers and have wallets full of store cards — ranging from Barnes & Noble to Macy's to Best Buy — to show for it.
But should they? Even the top lawyer for the National Retail Federation cautions against making too much merry with all the promotional deals for store credit cards.
"It would be a disservice to tell people to load up their wallets," says Mallory Duncan, NRF's general counsel and senior vice president. "People should balance their entire card portfolio carefully. Only take cards with genuine value to you as a customer."
So what's all the promoting about? Duncan says stores are "looking at all sorts of alternatives to keep down the ever-increasing Visa-MasterCard fees." Visa and MasterCard charge a fee equal to 2 percent of every transaction, which will cost retailers up to $26 billion this year, he says. When stores offer cards that are co-branded with Visa or MasterCard, they save some money in fees. When they offer their own cards, they avoid the fees completely.
"The cost of accepting other cards is so great that retailers can provide very significant benefits to consumers if they are willing to use their cards," Duncan says.
Retailers are also using the cards to build customer loyalty, which The Home Depot credit services director Spencer Allen acknowledges. The Home Depot has a regular six-month, no interest or payments promotion for new or existing credit card holders. A few times a year, the home-improvement chain also promotes a 12-month version of the offer, in part to attract new cardholders.
Consumers need to take into account both the pros and cons of accepting a store credit card:
Linda Sherry, director of national priorities for the non-profit group Consumer Action, recommends that customers steer toward bank cards or co-branded retail cards that are issued with Visa or MasterCard because they are rated higher in credit scores. "In some cases, having too many store credit cards can pull your credit score down," Sherry says. "If you're really good with credit card management (and) trying to get the discount, pay the first bill and call and close the account."
Sherry also recommends that consumers simply wanting to take advantage of discounts open store credit cards only when making big-ticket purchases.
Allen warns balances as part of no-interest/no-payment offers have to be paid off by the time the deal expires or consumers are hit with back interest.
