December 15, 2009
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Beware Store Branded Credit Cards, Pt.2
Is is adequate or interference?Retailers are not happy about the new rules and feel it will further stifle an already struggling industry. A debate is ongoing whereas retailers may be required to gather the information on the credit card application; however, they are not required to verify it. Furthermore, retailers say they do not need the information and that a credit history report with credit scores is sufficient in determining risks involved in issuing credit cards. A major concern for retailers is in knowing that shoppers will not be receptive to waiting for a more detailed credit investigation while most are anxious to get through the line and out the door. Many are also hesitant to casually give personal sensitive information that may be required for the credit card application to a sales associate.
The National Consumer Law Center (NCLC) has criticized the new rules saying the Fed did not adequately cover the situation. On the other hand, the Fed says they don't want to interfere with the retailers' ability to open instant credit card accounts at the point of sale. The NCLC believes this is exactly the type of behavior that caused the financial crisis in the first place. Furthermore, experts feel that if a consumer has a major network credit card such as Visa, MasterCard, Discover, or American Express, they can take advantage of lower interest rates and are less likely to get into unmanageable debt. Additionally, major networks partner up with retailers to offer rewards and points that can be used at the consumers favorite merchant like Toys “R” Us. These types of cards are typically accepted anywhere the network is accepted.
There are several things Americans should consider when thinking about opening up one of those store branded credit cards. These cards have the potential to actually lower your credit score even if the balance is paid off in full during the very first billing cycle. In some instances the effect could be minor; however, if you're looking to purchase a new home or major business investment, your deal could be impaired. You'll want to continue to learn how you could be negatively impacted.