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Credit Card Applications » News » Other » Americans Warned against Retail Cards

Americans Warned against Retail Cards

September 21, 2009 | Updated on September 21, 2009
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The content is accurate at the time of publication and is subject to change.

Financial experts and credit specialists are cautioning millions of American consumers against using retail credit cards. They point out that the number of active retail or private department store credit cards have soared in recent years, boosted by marketing gimmicks like teaser rates and rewards programs. Experts say that many cardholders fail to realize the danger of relying too much on these forms of cards, which they say are some of the worst kinds of credit cards.

Analysts explain that unlike major credit cards, retail cards are easily affected by the status of the stores or retailers that issue them. Large card companies have fall-back plans in the event of economic problems. Experts say that major card issuers diversify their investment portfolios, making their cards extremely safe for millions of clients to use.

Retail cards, on the other hand, depend largely on the performance of the stores that issue them. These retailers rely mainly on the revenue they earn from direct purchases, which means that any changes to the consumer market can have direct effects on their credit cards. If the store closes, then the retail cards will most probably close down along with it. However, cardholders may still need to pay off the balances left in their closed accounts.

Furthermore, analysts contend, a closed card account can affect credit scores and records in a variety of ways. Because the credit bureaus take note of every credit card closed either by the cardholder or the card companies that issued them, any closed cards will result in lower credit ratings. Having a lower credit score can limit a consumer's chances to get better rates when they try looking for new credit cards.

Experts point out that if consumers own retail cards, they should avoid getting rid of them if they are carrying high balances. Closing down cards with relatively high balances can result in lower credit scores. Financial advisers suggest using retail cards sparingly and paying off the dues regularly. This can help cardholders prevent their cards from accumulating debts that can be hard to get rid of, especially if the store or retailer closes down.

Retail cards are also known to have high interest rates. While most stores advertise these cards as the perfect way to shop without the need for cash, the interest rates can sometimes be too much for many consumers. Most of the rates offered at the beginning would often turn out to be promotional, limited, or teasers, experts say.

Disclaimer: This editorial content is not provided or commissioned by the credit card issuer(s). Opinions expressed here are the author's alone, not those of the credit card issuer(s), and have not been reviewed, approved or otherwise endorsed by the credit card issuer(s). Reasonable efforts are made to present accurate information, however all information is presented without warranty. Consult a card's issuing bank for the terms & conditions.
All rates and fees, and other terms and conditions of the products mentioned in this article/post are actual as of the last update date but are subject to change. See the current products' Terms & Conditions on the issuing banks' websites.
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