The Checkout

The Story on Store Credit Cards

Reader Marc R. from McLean warns shoppers to be leery of the store promotions that offer an immediate 10 percent discount to shoppers who sign up for a store credit card on the spot.

Looking for savings, Marc naturally took advantage of such an offer from Macy's. But a few weeks later, he was surprised when he received a store-branded Visa card--not a private-label card that could only be used at the store--with a $10,000 line of credit. Since he had more credit cards than he needed, including one from Visa, he called to cancel and get what he wanted in the first place--a more limited store card.

Macy's said it makes it clear in the credit application that the store will first consider you for a Macy's Visa card and that's what you'll get unless you don't qualify for it or you opt out at the cash register when you sign up for the card. But the credit card application is so full of fine print that you may not spot that caveat even if it is in bold capitalized letters. And in the haste to sign up for the discount, you also may not realize that you have a choice of a Macy's Visa card or a more limited store card.

What difference does it make? As Marc points out, every new credit card you get is posted on your credit report, along with the available credit line, whether you use the credit or not. If you are in a lower- or middle-income bracket, at some point lenders will become concerned that you have too much available credit. And too much available credit could reduce your credit score--leading to higher interest rates, not just on new loans but also on existing credit card debt. Plus, you could be denied credit. That all means a Visa card with a higher credit limit may not necessarily be what you want. It all depends on your financial situation.

As Marc R. says, "There is indeed too much of a good thing."

By  |  January 6, 2006; 8:00 AM ET Consumer Tips
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Comments

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While everyone should be leery of store credit cards, *all* of those credit cards go on a credit report - regardless of whether they carry the Visa logo or are "private-label." Whether you can use it at one store or any store, it still appears on your credit report. A good rule to keep in mind: If you're asked for a social security number when you apply for a card, you're applying for credit.

Posted by: Susan W. | January 6, 2006 11:35 AM

similar with Macy's, but I stipulated in-store only... and used an existing VISA, never gave a social security number... and boom! was notified by American Express that credit level on that card had been reduced!

Posted by: Naomi | January 6, 2006 1:22 PM

Store-only cards will usually count against your credit score. A bank card may help your score in some circumstances, but any new credit may temporarily lower your score. Your credit score is unrelated to your income.

Posted by: Mary | January 6, 2006 1:26 PM

In addition to the above comments about ALL credit cards being shown on the credit report, there is one more reason not to worry: having more unused credit actually improves your credit score. So, unless you're an impulsive spender, there is no problem with the Visa card instead of the private label card.

Posted by: max | January 6, 2006 3:01 PM

It is my understanding that having more available credit (particularly in relation to outstanding debt) only boosts your credit score, and this matches the experience I have had in the past.

Posted by: Margie | January 6, 2006 4:02 PM

If you don't carry balances or max them out, those cards do generally help your score - until you hit a point where you have more open credit lines that you have income to pay them back, at which point some conservative lenders (like banks) decide you've got enough credit already.

Posted by: Susan W. | January 6, 2006 4:25 PM

Macy's also sent me a Visa card even though I *did* specify at the cash register that I wanted only a charge card. Also, they tie parts of their wedding registry services to having a Macy's card (why I signed up); their enlarged network through the acquisition of Hecht's and other department stores will only increase their participation--and the errors.

Posted by: Christa | January 6, 2006 4:37 PM

Just a question here -- what do you want the company to do? They disclose what's going on. If you, as a consumer, do not bother to read the terms and conditions, it's on you.

Besides, a charge card is a charge card. Doesn't matter if it's a Macy's only charge card, or a Visa. They count the same.

Posted by: Anonymous | January 6, 2006 5:21 PM

I've had periods when I've carried no balance and periods when I've carried them--previously with a large percentage of it in debt, and now without about 25% of it in debt, because I was unemployed for 7 months. With the new job, I'll be able to avoid any further debt, but it may be another couple of months before I begin paying more than minimum payment again. I was offered several cards in the last few months which I took, which reduced the percentage of debt. My credit report goes back and forth from very good to good, because I've never been late in payment, I guess. What I don't understand from what people said above is why the banks offer you new lines of credit if they were going to reduce it? I mean, they can see all of your totals among cards. I'm single, and have a low overhead, so that may play a part in it. Anyway, even when 75% of my credit cards were debt as 3 years ago, nothing was ever reduced, so I'm curious. Does NOT using a card sometimes result in reduction of credit? Some of this is new to me?

Posted by: Patrick J. | January 6, 2006 6:58 PM

'without about 25% of it in debt' should have read 'with about 25% of it in debt.' One other factor may be important. I have all cards on auto-pay, so that even when I sometimes use balance transfer offers for a better interest rate, they still usually go ahead and take the minimum payment last posted out of my personal checking account as well, even when it means a credit balance. No big deal, but maybe good auto-pay records keep things afloat. MBNA doesn't even have an auto-pay, so you have to remember to pay it in one way or another.

Posted by: Patrick J. | January 6, 2006 7:18 PM

Shouldn't the person writing this column have done at least a bit of checking with the credit bureaus on this? A call to Macy's was not sufficient reporting here. The posters are right: More credit available generally benefits your credit score, while have too many open accounts, and too many recent accounts, generally decreases your credit score. But on balance, it's clear that having a lower ratio of debt to credit limits is good for your score -- and you get that by opening an account. Even a little reporting would have discovered this.

Posted by: Credit scorer | January 6, 2006 7:33 PM

The banks and credit card industry are all a bunch of plutocrats waging class warfare on behalf of the super rich against the little guy. As this Christmas posting on the *Intrepid Liberal Journal* illustrates.

http://intrepidliberaljournal.blogspot.com/2005/12/merry-christmas-from-credit-card.html

Posted by: Buckshot | January 7, 2006 11:12 AM

There is no such thing as too much credit available. This article is NOT true. In fact more credit is better. The problem is when you USE too much of your available credit. $10,000 debit is bad... but if you have $20,000 available you are using half your credit available. If you had $50,000 available, you are only using 20% of your available credit and will have a higher score.

Never close open accounts -- that REALLY hurts a score.

Posted by: Insider | April 16, 2006 6:04 PM

The above comment is true. Fair Isaac calculates a credit utilization ratio and factors that into 30% of your FICO score.
Ypou can read about that here in this artcile..

http://www.brokencredit.com/?p=36

Posted by: Paul | September 14, 2006 12:58 PM

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