The Real Cost Of Store Credit

MacysDenise Siegel walked to the sales clerk at Macy’s, ready to buy a new suit for work, when she was given an option: Apply for a Macy’s credit card and save upwards of 20 percent on the purchase. It sounded like she couldn’t lose, but when her bill came, she did a double take. The statement said she would be charged $2 a month if she didn’t pay the full balance, making the annual interest rate 750 percent. “I decided to cancel it,” Siegel, of Lakewood, said. “Their bargains are not worth (it) if you have to go through this rigamarole.”

Shoppers cramming into stores this holiday season likely will be offered discounts if they sign up for the merchants’ credit cards. The discounts can be tempting, but experts warn that these cards typically have high interest rates and low limits that could hurt consumers’ credit scores.

“The sizzle sounds great, but when you get to the meat of the offer, it’s not that good,” said Bill Hardekopf, chief executive officer of, a Web site based in Birmingham, Ala., that tracks credit cards.

Their warnings come as consumers face more obstacles to obtain credit. Banks, hurt by the recession, are raising interest rates, adding fees and reining in their approvals, the Federal Reserve Board said.

Store credit cards, in which a retailer will either contract out the business to a bank or operate it itself, are no different. There were 539 million store cards in 2008, down 2 percent from 2007. And consumers charged $143.1 billion in 2008, down 7 percent from 2007, according to The Nilson Report, an industry publication.

(The Nilson Report showed some retailers that operate in-house credit cards, such as Nordstrom and Target, still had sizable gains.)

Siegel said she had no problem re-establishing a Macy’s credit card that she had canceled long ago. The interest rate was 23.99 percent — higher than many other credit cards. But she figured it was worth it if she could receive a discount and pay off the balance each month.

When the November bill arrived, an item caught her eye. It said an interest charge of $2 would be added to her account if she paid less than the full balance. If that happened, the interest rate on her $99.24 purchase would have worked out to 750 percent. Read full article in APP.

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  1. if she wouldn’t get the card she would pay with cash on the spot. so why can’t she just pay it up at the end of the month. save herself the 20% and be left with no fees.

  2. If she hadn’t used her Macy’s credit card, how was she originally going to purchase the suit? With cash? Then, she should be fiscally mature to pay off her credit card statement each month.. or just don’t buy that suit. I have absolutely no sympathy of folks who charge on their credit card with no intention of paying it off and then complain when the store charges them interest. She had no business buying that suit if she couldn’t afford it. Go to a gemach instead or just pay cash the next time.

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