In Store Cards On Their Way Out

You know those perky and ever so helpful cashiers at local department stores handing out those “sign up for a card now and get 15% off your next purchase”?  They may be closer to the exit and totally on the endangered list.  It appears that the promotion of in store cards in shopping malls, foyers of retail outlets and check-outs of box stores will be on their way out.

In-store cards may be in contravention of the new credit card reform legislation recently enacted.  The law states that card issuers must consider the consumers ability to repay the outstanding balance of the card before a card is issued or even increasing the limit on any existing cards.  The instant credit approval that permits the sign up now ability gives no consideration if the applicant can repay any of the balance on the card.  Some of the big name retailers such as Saks Fifth Ave., Macy’s, and Best Buy are in a tizzy because of these new measures.

Instant Credit – Is it Worth It?

Often, the cashier clerks asks, “Will you be using your- enter name of store here- card today?”  If you say, “NO” they will offer the opportunity of getting an in store card.  The deal is sweetened with a 10 – 15% discount on the day’s purchases.  Who wouldn’t want 10% off?  The forms, application and these days, a terminal, prompts applicants to fill out the usual information such as name, address, date of birth.

With their immediate 10% discount or opportunity to be eligible for a cash rebate, the in house card may seem like a great deal but be careful that you don’t get caught.  That 10% saving may be costly.  Because in store card holders spend more money in store and generally higher interest rate.

The information is instantly processed and you can get your 10% immediately.  The actual card is mailed and will show up in the applicant’s mail a few days later.  The credit card agreement detailing the credit terms and conditions is also included with the card.  If there is a problem in the application, such as a history of late payments or other infractions additional information will be requested.

Some consumer watchdogs and credit professionals agree with making it more difficult for individuals to get instant in store credit.  They say it could cut down on the impulse and compulsive buying.

Some enterprising individuals can even pretend to be you and get an instant in store card.  This tragedy causes severe headaches for the consumer.

The New “Ability to Pay” Rule

Under this rule the immediate in store card will not be an instant process.  The card issuer has to comply with the provision of a review of the applicant’s current financial obligations, assets and in general, the consumer’s “ability to pay”.

Some clerks will ask for financial and income information at the point of sale.  This intrusive form of questioning while standing in line will put people off and possibly alienate otherwise loyal customers.

Purpose of In Store Cards

In store cards are not just about getting credit and giving away cards.  It is about the ability of the company to develop a database of customers.  This database is used for research, and can be marketed and mined with various programs.  In store card holders are the first to receive special deals and early bird specials for example.  People with in house cards have been identified as having more loyalty to the store and therefore will more likely to shop there.

Don’t worry its not all bad.  Applying for the lowly retail credit card can often times kick start the process of improving a beaten down credit score.

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This entry was posted on Friday, January 15th, 2010 at 9:00 am and is filed under Credit Card News. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.