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Friday, 15 June 2012

Retail Store Credit Cards

Many retail stores want to offer you a line of credit. But before you sign up to get 10% off your purchase and a free umbrella, you need to understand the effect that such cards can have on your credit both good and bad.

"If you apply for a {fill in name of store here} credit card today, you will receive a 15% discount on your purchase."

Oooh. What diehard shopper wouldn't be tempted?

Lately it seems that every consumer purchase is prefaced with an offer to apply for a credit card. Not Visas or MasterCards, but cards issued with a retail store's name on them for exclusive use at that store. J.C. Penney was one of the first retail stores to issue credit cards back in 1958. Since then, retail companies have recognized the profit to be made by operating their own credit card operations, as well as the instant punch in the arm to their marketing efforts. You've heard the spiel from the Gap, Kohl's, J.C. Penney, Dillard's, Target, Best Buy, Wal-Mart, Meijer's, Banana Republic, Sak's, Nordstrom's, even Bloomingdales, and the list goes on and on.

The marketing hook? Discounts for the store's merchandise along with other perks.

As with most things there are pros and cons for consumers:

Pros
  • Department store credit cards can be a good way to establish credit. The requirements for retail cards are often less stringent than for major credit cards. Gerri Detweiler, founder of DebtConsolidationRX.com and author of "The Ultimate Credit Guide" agrees. "A selective consumer can establish a positive credit history with retail store credit cards, which usually have lower credit limits and are therefore easier to obtain."
  • Special financing offers Applying for a retail card sometimes helps you score same-as-cash deals for larger purchases such as computers, appliances or furniture, allowing you to pay smaller monthly installments with no interest for a period--usually 6 or 12 months. Just be sure to pay off the full amount before the finance charge-free period comes to an end, advises Detweiler. "If your payment is not made in full by the same-as-cash period end, finance charges will retroactively apply from the date of purchase."
  • Special "savings events" Beyond introductory discounts, special savings events and sales just for the store credit card holders, there are often rewards programs where you can earn points for every dollar you spend on the store credit card, then cash the points in for, well, store credit.

Cons
  • High-flying APRs. The interest rates for department store credit cards are typically higher than major credit cards, usually found resting in the upper teens. The perks don't always outweigh the finance charges, therefore, if you can't discipline yourself to pay off your balance every month, retail store credit cards are not for you!
  • Open lines of credit affect credit history The store clerk tells you that if you open up a line of credit today, you can get one year free financing on that sofa you just purchased! "Well then, sign me up!" you say. Before you know it, you can have 15 lines of credit open; often, you've only used these cards once or twice to take advantage of the perks and you soon forget you had them in the first place.
  • Detweiler says to be very selective when applying for retail cards: "Limit yourself to one or two cards applied for during a six to twelve month period. Any more is considered a risk factor on your credit report."

It's a Balancing Act

So now that you know the pros and cons, how do you figure out if a retail store card is worth its weight? As always, you need to do a little math.

Find out what the APR rate is and add in any fees or minimum purchases required by the card. Then compare that with your potential store savings to make sure everything balances out. Are you going to have to spend more money than you normally would in order to earn the perks and discounts?

As an example: a typical card might have an APR of 19.80%, no annual fee and no minimum purchase requirements. The perks include 10% off your first in-store purchase and 10% off your first on-line purchase. You also get free shipping on all on-line purchases over $100. For every dollar that you spend in the store you earn one point; when you earn 350 points, you automatically receive a $15 reward card.

That's a nice set of incentives. That's also a lot of debt that you're putting on a credit card in the name of discounted merchandise.

If this is a store that you frequently shop and you plan to pay off your credit card balance each month, you can enjoy these perks in the clear. However, if you carry a balance on your card, don't even bother--because a 19.80% APR on $350 trumps a $15 reward card every time.

Performing math is a lot to ask when you're at the checkout counter with an armload of new purchases. But never sign on for a card without reviewing the fine print and finding out what you are signing up for. It might take away some of the fun of a shopping splurge, but in the long run you'll be happier because you are safeguarding your credit and the benefits of having good credit - the ability to purchase a new home, for example. These things will bring you smiles down the road -more so than will 10% off that hip outfit from the Gap--which won't be so hip in a few months anyway.

See also www.cardratings.com for more information about credit cards offers. Good luck.

Thursday, 14 June 2012

Store Credit Cards For Fair Credit

Will a Store Credit Card For Fair Credit Application Damage Your Credit Score?

Yes and No - It depends in good part on your timing.

Yes, it hurts your credit score if you've submitted other applications in the recent past. To Equifax, Experian and TransUnion - the three main credit bureaus in the U.S. - as well as potential lenders, applying for lots of credit cards in a brief period of time is viewed as desperation. Trying to open several lines of credit in the span of a few days or weeks makes them think that you've been turned down and you're scrambling to find another source.

No, a merchant credit card application really won't hurt your score if it's been weeks or months since the last time you applied for credit. If you wisely wait a few weeks or months between submitting applications, your score might take a very small hit. However, if your score is already good or better, the hit you take will be very minor and nothing to worry about.

It's helpful to remember that lenders are for-profit enterprises, and if your score is good, they'll still extend credit to you - reluctantly - in the hopes of making money from your account. However, they avoid risk like it's an infectious disease, and when someone applies for a store credit card, car loan, cellphone account, or any other line of credit in a short period, it often means one of two things to them:
  • You're desperate to get anyone to extend credit to you; or
  • You're the victim of identity theft, and the thief is trying to open as many credit lines as possible to defraud the lender and put you in heaps of trouble.
It's also helpful to remember that new credit applications comprise 10 percent of your total score. That's not a big chunk, but when it comes to your credit score, every little bit helps. Within that 10 percent, the following credit items are taken into consideration:
  • How long it's been since the last credit inquiry on your name
  • The time since recent openings of new credit accounts by type
  • The number of recent credit inquiries (like your store credit card)
  • The number of recently opened lines of credit, proportion of new accounts to total number of accounts, and type of credit account
Therefore, a store card application can hurt your credit score either a tiny bit or more substantially. It depends on your current score, your credit management, and your timing. If you have a very good credit score and you happen to open two new lines of credit in a short period of time, don't sweat it. Your credit score can handle a slight dip. Nevertheless, if your score could use some polish, it may take a bigger hit in the same circumstances. At the same time, these new lines of credit could eventually help your score if you pay your bills on time and keep your balances low. It's all about how well you handle your credit behavior, including your store credit cards.

See also freescore.com

Tuesday, 12 June 2012

Shoe Store Credit Cards

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Monday, 11 June 2012

Department Store Credit Cards After Bankruptcy

It is no secret that bankruptcy deals a massive blow to your credit history. Following bankruptcy, you will need to work harder to establish new credit, and maintain the credit properly. While bankruptcy sets the stage for a fresh financial start, it does not make the process of rebuilding a strong credit history easy. By taking the right steps, you can find yourself in good credit range within a year of bankruptcy.
  1. Look back at what caused your credit issues. Was your situation caused by forces beyond your control like an illness or layoff? Did you neglect your bills? Were you able to handle your finances before a crisis happened? Have you learned how to handle your finances? Rebuilding credit after bankruptcy is only as good as your ability to handle the credit you receive.
  2. Get a secured credit card as soon as your bankruptcy is discharged. You must start to add positive credit to your credit history. Contact your local bank or credit union to see if a secured card is offered. Make sure the lender reports to all three credit bureaus -- Experian, Equifax and TransUnion. If your bank doesn't offer a secured card, ask if the bank offers a secured personal loan option where you can deposit money into a savings account as collateral.
  3. Keep the balance on the secured credit card low. Your goal is to build credit, not to charge up your credit cards. A balance between 1 percent and 20 percent of your credit limit is ideal. It doesn't matter whether your credit limit is $300 or $1,000, by keeping the balance low and making all payments on time, your credit score will go up after six months.
  4. Wait six full months before applying for a store credit card. Whenever you apply for new credit, your credit score takes a hit, but after six months, the score will recover and go higher than before, especially if you have handled the account well by keeping the balance low and making the payments on time.
  5. Apply for the department store credit card seven to 12 months after opening the secured credit card. The potential lender will now see you have held another credit account and managed it well. Your starting balance will likely be low, but with proper handling, your account limits should rise.
Resist the urge to apply for multiple store credit cards. Each time you apply for credit, your credit score drops a few points. Multiple credit inquiries also look bad to potential lenders as it appears you are desperate for credit.

Sunday, 10 June 2012

Department Store Credit Cards For People With Bad Credit

Bad credit blocks you from opening new accounts because lenders who see a negative past history are afraid you will continue your bad financial management. Department store credit cards give you a way to prove that you are serious about rebuilding a good credit rating. These accounts work like regular credit cards so you can demonstrate that you will use credit responsibly despite your past issues.

Store credit cards are revolving credit accounts good for use only at a particular store, chain or brand of retailers. You get a specific credit line to spend at the designated stores and access it with a credit card. You can buy whatever you want at those particular stores until you reach the credit limit. You must pay at least a minimum amount every month, which is noted on your statement, but you can pay more. You do not pay interest if you send the full amount owed every month by the due date.

The requirements for getting a department store credit card are similar to those for major credit cards like American Express, Visa, MasterCard and Discover, but stores often have lower credit rating thresholds than the major card brands, according to the Bankrate financial website. People with past financial problems like past-due accounts, or even bankruptcy, often qualify for retail cards even if they cannot get branded accounts like MasterCard or Visa.

People with bad credit rebuild it by using department store cards regularly and responsibly. The Fair Isaac scoring company advises that your score is most strongly affected by your payment dates and how much you owe on open accounts. Your score rises if you make small purchases on your department store credit card and either pay them in full monthly or spread out a string of on-time payments. Eventually, this qualifies you for major brand accounts.

Department store credit cards often give low credit limits and charge higher interest rates than regular branded cards, according to Bankrate. Some accounts do not help people with bad credit because the issuers do not report activity to the Experian, TransUnion and Equifax credit bureaus. On-time payments have no effect on your credit rating if they never appear on your credit reports. Do not apply for a retail card without asking whether the bureaus get notified of your activity.

Store credit cards are helpful if you have bad credit, and they also let you establish a history if you are new to credit use, according to Bankrate writer Leslie McFadden. Of your credit score, 15 percent is affected by the amount of time you have used credit, so retail accounts let you create a track record for a year or two before you apply for major cards.

Reference Bankrate.com

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