Discount Stores Joining the Retail Credit Card Game

by Mary Clare McGraw

Many national retailers offer their own credit card for their loyal shoppers to use at their stores. This is a win-win situation for retailers because they promote their customers to spend money, while also making money off of the interest charged on the credit card. Retail stores like Bloomingdale’s, Neiman Marcus, and Sears are notorious for their credit cards for their customers and now, discount stores like Kmart, WalMart, and Target are now offering their own credit cards as well. With these discount store cards, the perks are as nice as the penalties are severe and the interest rates are high. The Kmart card does not charge interest for the first 6 months, but after the 6 month introductory period, the interest rate cardholders will have to pay on their bill is 11.9% on both Kmart purchases and non-Kmart purchases, the latter of which they pay the interest on from the time they sign up for the card. Shopping with a Target Guest Card helps to raise money for a local school of the cardholder’s choice, which is an attractive feature, but it also comes with a jaw-dropping 21 percent interest rate. These cards will essentially kill you if you do not make your payments on time because the rates are so high.
In this recent economy, discount stores have not been hit quite so hard, whereas other retail companies have not been so lucky. What happens if you use a retail credit card from a company that files for bankruptcy? Well, unfortunately for you, you still have to pay off your outstanding balances. The bank who underwrites the credit card you are holding with that company’s name assumes the debt and becomes your creditor and you have to pay them back in full. Many consumers have found themselves in a battle with the bank trying to claim they should not have to pay if the company is going out of business anyway. The bank will be sure to notify you of your obligation to pay but you will have some nasty paperwork to handle and it is not something you want to deal with. There is often no way to know if a store you shop at frequently and hold a card at will go under but just be prepared to pay off your balance no matter what!

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