If you have ever gone shopping at a department store, you’ve likely been tempted to sign up for one of their department store credit cards with the lure of 10% off on store purchases right upfront and the prospect of additional discounts throughout the year. But usually, you’re offered some sort of irresistible hook upfront to get you to sign up for their card.
Aside from the exorbitant interest rates, an additional downside to the use of these cards is the negative impact they can have on your credit score. In fact, just recently, a woman testified at a Congressional hearing about her personal experience with this type of credit card. After getting approval for a Macy’s store credit card, the APR on her Bank of America card skyrocketed from 7.9% to 22.9%. Applying for one department store card should not have such a significant effect on your credit score, but applying for several simultaneously most certainly will have a deterimental effect even if you get approved. Worse yet, applying for multiple store cards and getting rejected can have an utterly devastating effect on your credit score though. So caveat emptor.
Credit card issuers are required by law though to notify cardholders of changes to their card agreements, including interest rate increases, at least 15 days before they can legally take effect. But ambushed cardholders feeling the pain of these skyrocketing interest rates are starting to exert political pressure on their locally elected officials. In fact, Congress is making significant progress on new legislation to reform these predatory lending practices in the credit card industry.
Senator Carl Levin (D) from Michigan, who is spearheading the legislative reform of these unfair practices on Capitol Hill has outlined reforms to a new bill that would include changing the billing practices of card issuers, so often blindsiding unsuspecting cardholders. The new legislation would also require that card issuers notify their customers at least 45 days ahead of changes to the terms and conditions of their card agreements, instead of the current 15 day minimum.
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