Why You Should Beware Of Department Store Credit Cards

01_Credit02_RockieNolanPhotographed by Rockie Nolan.
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I remember when I opened my first department store credit card in Manhattan nearly 20 years ago. At the time, you were allowed to open a line of credit for $1,000 on the spot whether or not they eventually approved your card, which took several days. What an attractive way of bringing in new customers and keeping their cash registers ringing! I think I may have opened and closed these accounts at least a half a dozen times: I would pay off my balance, feel guilty and close it — then, a few months later, do the same thing all over again.
I was the ideal customer: a total shopaholic. And, while I am, and always have been, responsible with my regular credit cards, there was something strangely different about having a department store credit card. Naturally, you only have cards for stores you love, and they give you another reason to shop there (whereas, without that credit card, you can shop anywhere — or not at all). The stores capitalize on the psychology of “belonging” to separate you and your good, common sense. It appeals to your basic instincts, dangling fabulous carrots like special member discounts in the faces of loyal, card-carrying members.
But, the biggest difference between regular credit cards and ones from department stores (and coincidentally, the biggest trap) is the outrageous interest rates. I recall that most of mine were well over 20 percent (compared to an average of 13 percent on a fixed-rate credit card) — nothing short of robbery. Consumers with questionable credit may find themselves only able to qualify for bank credit cards with high interest rates, but that’s the norm for all shoppers who apply for department store cards.
02_IMG_2388_r_PhotoRavenIshak2Photographed by Raven Ishak.
Also, customers are required to pay a larger percentage of their bill each month in minimum payments. If you’ve fallen into the habit of regularly shopping at that department store, then you’re throwing your money at them faster than the speed of light. I admit that as a young, gullible consumer, I fell for all the tricks: the fabulous shopping points, discounts for opening new accounts, early sales, and private mailings for shopping events.
It took a good 10 years of shopping with my Barneys card until I realized there was a problem. I was on a hamster-wheel cycle of shopping. Each month I would shop, pay my bill or a good portion of it. And then the next month I was back in the store repeating the same mistakes all over again.
I didn’t suddenly come to the conclusion that I wasn’t in control of the situation, in fact. It was actually a friend and colleague who always noted my new purchases. One day she described my way of shopping as “robbing Peter to pay Paul.” Ouch.
As quickly as I dismissed her words, I knew in my gut she was right. All my money was going to this store and I was playing a tricky game, scrambling to pay off my purchases so I could go back and buy more. Of course, I didn’t ditch the card right away, but her words gnawed away at me. Finally, I decided I couldn’t give up my habit without giving up my card. (I also lost my job during the recession, which prompted me to make some immediate changes in my spending.)
Now that I no longer have the store card (and it’s been a while now), I’ve found I rarely shop in this den of fashion fabulosity. Why? Because I don’t have to. I can shop anywhere, and I don’t feel tied to spending my shopping dollars in one place, or most importantly, spending them at all.

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