Retail Store Credit Cards
Retail store credit cards are a convenient way to get the items that a person wants or needs and most stores make them easy to obtain and use. Many people have several of these types of plastic cards and can take advantage of store offers that provide a discount for purchases when using their charge account. Making retail store credit cards work to a person's advantage can be difficult, especially when the balances are not paid every month. Credit can be likened to a loaded gun; it must be handled with extreme caution or else great destruction can happen. But if a person has a strong will to resist the many temptations that the privilege of borrowing money can bring, these small plastic rectangles most of us carry around with us truly are a modern convenience.
Large department stores had charge accounts in the years leading up to the initial issuance of the credit or borrowing card. The idea of allowing a person to have the privilege of not paying for items at the time of purchase grew out of an understanding that the customer would pay the account on payday or on a certain day of the month. There was not even the thought of the customer extending the account beyond the thirty day limit. Today, the modern plastic card in our wallets certainly allows Americans to live beyond their means and many borrowers have extended their debt to the maximum allowable amounts, sometimes on more than one of their retail store credit cards. The result is that the furniture we bought the clothes we buy, the auto repair we had completed or the groceries that we purchased on our various plastic charge accounts have slowly made many of us in America debtors to the large banks that back these accounts.
Like it or not, most Americans over eighteen have a borrowing history score called a FICO score. This acronym stands for the Fair Isaac Corporation which developed the method by which the scores are compiled. Today, three large firms, Equifax, Trans Union and Experian keep track of every purchase made with our plastic and then the history of our payments and the mounting debt will begin to factor in to provide a score that is used for everything else in life, from renting an apartment to buying a car to purchasing a house. Many of the households in America, in fact by many estimates seventy percent live pay check to pay check and the reason is the high charge account payments that families must provide each month. These payments include MasterCard, Visa, Discover, American Express plus the various retail store credit cards that Americans have.
Credit scores are then figured by four big factors and these scores truly do rule our financial lives until our family puts us in the ground. They can be changed but only slowly over time. The first factor is the payment history and late payments on any credit account, car, house and retail store credit cards will be counted as a black mark on our borrowing good name. The amount of the debt on each of the pieces of plastic that we own, including retail store credit cards also is factored into our FICO score, with greater negativity on the score the closer to the maximum borrowing amount we get. Being maxed out is not a good thing. The third factor in figuring our FICO score is how long we have had a borrowing history, which kind of hurts young people unless they have really handled their plastic responsibly. The final factor is how often a person seeks new lines of credit with frequency being a negative.
While most big credit card companies such as Visa and MasterCard offer enticing low interest offers to get started, retail store credit cards are usually not so accommodating. Right from the start, stores who extend easy borrowing privileges have high interest rates, usually hovering around eighteen to twenty percent. This means that making minimum payments can stretch out to thirty years in order to pay off retail stores well as those bank plastics we have in our wallet and purse. For many people, the clothes and shoes and groceries bought ten years ago and still being paid for now, and may continue to be for many years to come. The plastic card in our wallet truly is making many people economic slaves to banks. So many people are in bondage to credit and drugs and alcohol and other addictions but Jesus Christ lived, died and rose from the dead to break the chains people have. "The Spirit of the Lord is upon me, because he hath anointed me to preach the gospel to the poor, he hath sent me to heal the brokenhearted, to peach deliverance to the captives, and recovering of sight to the blind, to set at liberty them that are bruised." (Luke 4:18)
The retail store credit cards that you have in your possession can be a very convenient way to take advantage of super sales that all stores have from time to time. Whether it is clothes or furniture or some other needed item, if a person doesn't have the money at the moment but the sale is on, the plastic car in the wallet can be very helpful. But the only way a sale will work is if there is no interest paid on the account and that isn't possible with most retail store plastic cards. Unless a person is highly disciplined to pay off a balance very month, the best advice is to stay away from plastic charge cards altogether. Pay in cash and sleep well at night.
Department Store Credit CardApplicants for a department store credit card usually fall in one of four categories. The applicant is: 1) a young adult who is establishing creditworthiness for the first time; 2) someone who has a bad credit history due to late payments, non-payments, and perhaps even bankruptcy; 3) a frequent shopper of a particular retail chain; 4) someone who wants to take advantage of a special promotion the company is offering. This type of card allows the cardholder to charge for the purchases that are made at either a retail location or the company's website. It cannot be used for purchases from other companies like one of the well-known cards, such as Visa or Mastercard, that are accepted at multiple retailers. Generally speaking, a credit card from a department store or other retail company is easier to obtain than one of the more popular cards. As long as the applicant can show steady employment and some stability, the application is usually approved. Thus, an individual who is either establishing or re-establishing his creditworthiness may find it easier to be approved for a department store credit card than for general revolving accounts. But the easy approval benefit comes with a downside the interest rate is usually high for unpaid balances.
Someone who favors a particular retailer may want to open an account for either convenience or to participate in any reward programs that the retailer is offering. For example, a person who has bought a fixer-upper house may find it convenient to obtain a revolving line of credit for a major home improvement retailer. This way, the person can track expenses. Or a shopper may love the fashions of a specific clothing retailer. Having that retailer's department store credit card means the shopper receives email notifications of special sales and discounts before they are advertised to the general public. The cardholder may also receive reward points or extra coupons that aren't available to other shoppers. Sometimes a retailer may offer a special financing plan for a major purchase. This may be the incentive for a person to apply for the retailer's credit card. Let's say, for example, that an individual purchases a laptop from a major electronics chain. The chain is offering a zero-percent financing promotion for twelve months. The customer may apply for the offer to spread out the payments for the laptop instead of taking the lump sum out of her savings account or charging the purchase to another lender that will charge interest on unpaid balances.
Except for such special promotions, the interest rate on a department store credit card is usually well over ten percent, and may be over twenty percent, on unpaid balances. Cardholders should be careful to only make purchases that can be paid for before the account's due date. If paying by check, the cardholder should mail the check a week to ten days before the due date to ensure it arrives on time. When making online payments, the cardholder should be sure the payment is scheduled at least two to three days before the due date. A better practice may be to write the check or make the payment within a day or two of using the card. Paying off balances in full every month shows responsible financial behavior and saves money in financing costs. The cardholder who is trying to establish or re-establish creditworthiness should look through the fine print to be sure that the payment history is reported to the three major credit-reporting agencies, namely, Equifax, Experian, and TransUnion. If this information isn't in the terms and agreement contract for the account, the individual should call the lender. There is no need to have a department store credit card from a lender that doesn't report this relevant information.
The writer of Proverbs, most likely the wise King Solomon, wrote: "Whoso keepeth the law is a wise son: but he that is a companion of riotous men shameth his father. He that by usury and unjust gain increaseth his substance, he shall gather it for him that will pity the poor" (Proverbs 28:7-8). Usury means high interest rates. The passage is cautioning against charging others high interest rate on borrowed money, but should also be seen as a caution against borrowing at high interest rates. This can be a financial trap that's difficult to escape and cause economic difficulties for a person or a family. So while being approved for a department store credit card can help an individual establish or re-establish creditworthiness, the account should be used sparingly and with good judgment. Purchases shouldn't be made if the balance cannot be paid off right away this cannot be said often enough. Once creditworthiness is established, the individual may wish to apply for a well-known card that will be accepted at multiple retailers. However, even if the interest rate is much lower, the same caution applies. Charges should not be made unless the balance can be paid off in full every single month. This can take diligence and discipline, but these good money habits are the path that leads to financial security.
Similarly, a department store credit card can provide shoppers with convenience, advance notice of sales, special discounts, reward points, and favorable financing plans. But even though these cardholders may have an excellent FICO score, they still need to be careful that balances are paid off each month. Those who are participating in a promotional financing plan, such as the zero percent interest for twelve months example given above, need to carefully follow the contract's terms and agreements. A payment that is even one day late usually triggers interest being added from the date of the purchase. These participants need to be sure that each payment is made on a timely basis. Many people would be well advised to close accounts once the purpose for opening it has been achieved. In that circumstance, the laptop purchaser can close the department store credit card from the electronics retailer after making the final payment.