Source: Washington Post, 10/20/2017
Retailers are increasingly relying on their store branded credit cards to bring in profits, but at what cost to the consumer?
As a former employee of a major fashion retailer, Banana Republic, i’m well versed in the benefits and downsides of store cards. The major issue with store cards is that they are offered in such a manner that makes them seem beneficial to the consumer, when they could actually have very negative consequences.
So the question becomes, is it ethical to offer store cards to consumers without first telling them about the astronomical interest rates that these cards come with?
When store cards are offered by retailers, it typically happens at the time of checkout, and they offer you a 15 to 20 percent discount on your purchase if you open their store card. But rarely, if ever, is the interest rate mentioned by the sales person selling you that credit card.
To get an idea of how much these cards matter to their respective retailers, you have to look at the numbers. According to this article, a whopping 39% of Macy’s profits last year came from credit card fees!
As for the impact on consumers, high interest rates on store credit cards have caused higher than normal delinquency rates on store cards; And with the Federal Reserve increasing interest rates, these store cards are seeing their interest rates go up as well. The average store card now has an interest rate of 25 percent APR, compared with just 16 percent on non branded credit cards.
If retailers are going to push these credit products harder to stay in business, they should take it upon themselves to educate consumers about what they are signing up for. All too often, retailers advertise all of the perks that their card has, and they say nothing about its interest rate. Its time that retailers educate their consumers fairly so that they can make smarter decisions.
Original Story: https://www.washingtonpost.com/news/business/wp/2017/10/20/retail-credit-cards-increasingly-come-with-perks-and-a-25-percent-interest-rate/?utm_term=.fae0aa0a14e1