Department Store Cards

The advantages and disadvantages of getting an credit card from a department store.

Almost all department stores issue cards for their customers for a couple of important reasons. The most important reason would be to increase sales. Many studies have proven that people who have store-issued cards tend to spend more at those stores. Another major reason why department stores issue cards is due to the money they make from financing the products sell. Since most department stores charge higher interests, the money they make from credit card operations is, in many cases, more than what they make from merchandise sales. One other reason is consumer data collection. Since card transactions are easily traceable, a variety of valuable data are mined and analyzed accordingly.

Department store cards are also relatively easier to get, and are among good ways to establish credit. However, they are not the best way to finance a purchase due to the high interest charges. Some zero-interest-financing options offered in some stores can give you good deals though. However, you need to be very careful, because, if you do not pay the due amount in full before the grace period - shall we say, 12 months - ends, you will have to pay all the interest accumulated from the time of purchase.

Some department stores have their cards issued by a commercial bank - which means that the card has the department store's name on it, but is actually issued by a financial institution. These cards are both a store card, and a bank card. They can be used at places other than the department store, whose name is written on the card. Department stores cooperate with a commercial bank usually in order to stay away from the state laws that have restrict requirements about fnancing. Cooperation with an out-of-state commercial bank solves this problem, which, in return, means that you will not be protected by your state laws if you use such a card. That does not necessarily mean that dual cards are bad. It is just that you need to know how much protection you have before accepting credit offers. However, this actually should be the case for ALL of your financial dealings, not just dual cards.