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• Store card customers can get preferred treatment. I talked to a gentleman who told me that when he went to an expensive store on Rodeo Drive in Beverly Hills to return a pair of shorts he was at first told it was too late for them to be taken back because “the season is over.” When he said, “you can just credit it to my store charge ac count,” the salesperson said, “Oh! You are one of our charge customers.” And he returned the shorts with no more problems. • Store cards give you extra leverage in getting problems with merchandise corrected. The store does not want to upset its best customers. And its assumption is that its best customers have, and use, the store’s card. • Stores often send cardholders, as their best customers, special catalogs and early notices of sales. There are more and more special “freq charger” programs for store card or hybrid store/bank card holders that provide extra discounts, free items, or a special bonus for purchases made with the store card. • Finally, store cards provide somewhat greater stop-payment protection than do bank and T&E cards. The $50 and 100-mile limitations do not apply to store cards. Disadvantages of Store Cards . A very serious disadvantage is that store cards tend to carry interest rates higher than those of most other cards. Once upon a time, store accounts almost never charged interest. Some of the better, or at least more costly, stores did not even send a bill until months after a purchase was made. It is not like that anymore. Now the bills go out every month. There is a twenty- or thirty-day free-ride period when no interest is charged. If the bill is not paid off during that period, very high interest charges are added on by the company. In fact, some store cards don’t even offer a grace or free-ride period. One company solicits consumers for a card that socks the card user for interest, even if the cardholder pays the account off in full as soon as the bill comes. It used to be if you missed a payment or did not pay a bill on a store card it sometimes took a long, long time before the store reported you as a “slow pay” or “no pay” to the credit bureau, if they ever did. (Brooks Brothers used to be famous for this, they didn’t even like to send out bills to their genteel clientele, it was said. But, things have changed at Brooksies). Many stores didn’t wish to rile their best customers; they thought of credit as a service to their customers, not a profit center. Unfortunately, stores changed their ways as credit cards were made available to the hoi polloi. Today the store card is most definitely a profit center. Today, if you do not pay off your balance in full each month the interest charges may be even higher than they would have been if you had used a bank or T&E card for your purchases. Be aware that store cards are often not the cheapest option for financing a purchase. As Consumer Action News of San Francisco put it in a pre Christmas story, “High Interest on Store Cards Can Haunt Holiday Shoppers All Year Long.” Consumer Action said it surveyed sixty-two department and chain stores nationwide and found annual percentage rates on store cards as high as 22.9 percent—with 97 percent of the surveyed cards having an interest rate of 19.8 percent or higher. Ken McEldowny, director of the organization says: “If you want to use credit to pay for some of your holiday expenses, you are probably much better off using your flower interest rate] bank credit card.” Scott Harshbarger, Massachusetts attorney general, says he is shocked and outraged element of greed that I see here.” Pete Willison, a consultant to credit card companies, says that rather than lower their rates around the holidays, retailers are more likely to raise credit limits and offer such things as “90 days, no interest” promotions. Some stores are apparently so embarrassed over their rip-off interest rates that they don’t want to disclose them on the application. For example, Consumer Action reported that cards used by a group of sister stores, including The Limited and Lane Bryant, which are issued by World Financial Network Bank of Ohio (a bank apparently owned by the stores), were charging interest rates as high as 22.8 percent, but that they took advantage of a complex and little-known loophole in federal law, which mostly requires up-front disclosure of interest rates and fees on the application, to avoid telling all on the application. In stead they say that you can call a toll-free number to “request specific information about such costs.” Then when CA called the number, the first thing asked for by the automated system was your account number. How someone with no account number (or even someone with an account number) could squeeze information about interest rates out of the computerized system is unclear. And maybe that’s the whole idea. Yet another store card scam is the “zero interest” routine. With most of these offers (“No Interest Payments—Zero Percent Financing Until Halloween in the Year 2099!”) interest is building up every day on the balance. If you pay the entire amount off in full before the zero percent deadline, the interest is “forgiven.” Miss the deadline by thirty seconds and you’ll be paying all the interest you thought you had avoided—and usually at an exorbitant interest rate like 22.8 percent too. There is also the extra temptation to spend that all those cards make it oh-so-easy to give in to. But the temptation is more or less held in check because store cards are good in only a relatively few places. The new dual store cards, of course, have unlimited temptation, just like a regular bank-issued card. And many merchants find that the average sale on new store cards runs high. A clothing retailer headquartered in Florida says that sales on its newly issued store cards ran 30 percent higher than the average charge on American Express and 60 percent higher than the average sale at its stores. Finally, there is the privacy issue store cards can present. Data mining lets the store know all sorts of private things about you. For example, you might buy maternity clothes at a store using your store card, and nine months later the chain might send you a baby clothes solicitation. If you used a Visa card to buy the maternity clothes, the store couldn’t do that because it probably wouldn’t be able to match up the dress sale with your address. Merchants theoretically can’t usually get your address or telephone when you pay with a non-store card. They know only the account number and the name on the card. Of course, there are companies who will take a list of card numbers and names and reverse-match or reverse-append them to addresses and phone numbers from other credit applications, voter registration records, driver’s license information, etc. No doubt some information entrepreneur will, absent emergency legislation, be selling this sort of stuff over the Internet. American Express has been doing this sort of thing for a long time and also offers this sort of service to merchants. Buy a diamond neck lace at a Beverly Hills store, and three weeks later you’ll get an unasked-for call kindly advising you that the matching earrings have arrived. Let’s just hope that when your spouse answers the call, that it was your spouse who got the necklace! In fact, The Wall Street Journal reports that one major national casino operator has computerized information on six million people, including information on purchases made elsewhere that it buys from card companies and uses for targeted marketing to increase gambling by those in its database. This sort of privacy invasion is building up quickly, and it looks as though some remarkable feats of tracking your personal information through your purchase history are well on the way. That’s good if you’re a hard marketing merchant; maybe not so good if you’re a privacy- hungry consumer who already gets too many junk phone calls and way too much junk mail. |