Senator Charles Schumer (NY) is warning consumers not to use store credit cards, saying they average 21.19 percent interest, and he's (surprise) urging the FTC to regulate store card interest rates.
I'm sympathetic wth the Senator's goals in helping consumers avoid high-interest debt, but I'm loathe to call in the FTC to regulate private business.
My other concern is that it's awfully simplistic to say "avoid store credit cards." The truth is, a credit card is either right or wrong for you based on your spending habits, not necessarily the characteristics of the card. If you pay off all of your balances before the grace periods are up, why not take advantage of the discounts store cards offer? And not all store cards are what they seem. The Target Visa card was named one of the 10 best cards for consumers by Consumer Reports and Cardweb.com.
If you don't pay off all of your balances in full every month, then avoid high-interest cards, period. If you always manage to pay off your balaces before the grace period (as a third of us do), then a store card isn't necessarily a bad idea.
I'm pretty much an ANTI credit card guy. But putting that aside for a minute, I have some thoughts about store cards.
1.)If your going to pay your balance in full every month, just find yourself a good rewards bank card and use it instead of the store card. The reward throughout the year might be better than the one time savings with the store card.
2.)Many retailers are becoming credit card companies with a few items out front. I haven't seen recent figures but there have been times the credit divisions make more than the retail divisions of the companies.
3.) I think having bank cards PLUS store cards would be, for many, too much debt to carry. It's so easy to get in trouble, the store cards might be the last straw for many consumers.
With that said ,I don't believe it should be legislated. It should be a matter of free market economics.
Posted by: Craig | November 28, 2005 at 05:58 PM
I'm not so much anti-credit cards as I am anti-borrowing. Credit cards are okay to use as a convenience item; they allow you to shop without having to carry around lots of cash. But when credit card users begin carrying over balances and turning those credit purchases into long-term loans, they've got a problem.
Here's another article with some of the positives of credit card use:
http://www.marketwatch.com/news/story.asp?guid=%7B29AB19C0-830A-4D9D-BA5D-F198F75957B7%7D&siteid=google
Posted by: Jeff Michael | November 29, 2005 at 11:41 AM
Store cards can be great, if used correctly. Keeping your balances around 30% is the way to go, as well as making your payments on time, of course.
Posted by: Credit Expert | October 13, 2008 at 03:32 PM