December 15, 2009
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Beware Store Branded Credit Cards, Pt.1
Looking beyond the initial savings.When was the last time you shopped at a department store and didn't get the full marketing pitch for the store's branded credit card? Retailers have placed added pressures on sales associates to hound customers into applying for the store's branded credit card. Additional percentages off the customer's total purchase could mean big savings if they were purchasing a high ticket item. Customers are tempted with some very inviting incentives that sound good in the heat of the moment, but can actually end up costing them more than what they save. The next time you find yourself in this situation, you'll want to consider a few things before saying yes to that credit card.
Experts say that if you look beyond the initial store discounts at the time of opening the store's credit card account, you'll find the terms and conditions are equal to cards offered to sub-prime or individuals with no credit history. Some store cards assess up to 25 percent interest rate; however, most consumers don't realize it because they typically don't take the time to read all the fine print. Basically, shoppers who fall prey to these offers expect to pay the balance off and file away the credit card. Unfortunately, the good intentions of most shoppers become difficult to carry out when the bill arrives and the budget doesn't allow for full payment.
This deceptive practice did not go unnoticed by lawmakers during the scripting of new credit card reform legislation. Under terms of the new law, regulars will be responsible for devising a method that would require lenders evaluate the consumer's ability to repay the debt prior to issuing a new card. The Federal Reserve has established new guidelines for the development of card application. Consumers will soon be required to provide more information pertaining to income and assets during the card application process.