Lending Club Blog

The Store Card Revisited

It seems as though the message about store cards hasn’t reached everyone yet, so it certainly warrants further discussion here on the Lending Club blog. I cringed when I heard someone in line ahead of me trying to “save 10%” recently while shopping at a department store.

While the trouble with store cards will be reviewed below, what made this case particularly frustrating was that the customer’s bill was only $30. I know that basic math skills aren’t as strong as they used to be, but I have to assume that nearly everyone can calculate that only $3 would be saved.

Here are the potential pitfalls of chasing that 10%:

High Interest Rate
Most store cards are run by third party banks and charge even higher interest rates than regular credit cards, averaging 20-25%. With such high rates, even small balances can quickly balloon. Any “savings” on the initial purchase will be eclipsed by the interest payments that will likely follow (unless the card holder pays in full right away).

Identity Theft Exposure
When prompted by the cashier, who was having trouble reading her application, the aforementioned customer disclosed her Social Security number in front of other customers. This is an open invitation to identity thieves. Your Social Security number should be treated as the most sensitive of personal data.

Another Bill Each Month
Having another card is also another deadline that you’ll be faced with each month. Remembering to pay the bill and the potential for fees and accumulating interest may be reason enough to avoid applying for a store card.

Credit Score Effects
Having an additional card also has the potential to lower your credit score. By having additional credit available through your store card, you may be seen as more risky to lenders for future credit. You may also increase your balance to credit available ratio, which could lower your score as well.

Conclusion
A final disadvantage was the anger clearly visible on the faces of other customers waiting for the application to take place. It wasn’t clear if they were angry at the customer for wasting their time in a futile attempt to save a few dollars or at the store for preying on the customer’s apparent financial ignorance. In any event, be sure to remember that saving 10% comes at a steep price.

Monday, August 27th, 2007 at 7:22 am

Comments (0)

  • Archives z

Recent Posts

We filed to go public today

We filed a registration statement with the SEC today… Read More »
August 27, 2014

Our Billion Dollar Quarter

We’re excited to announce  that we’ve facilitated over $5… Read More »
July 8, 2014

Is Lending Club Available in My State?

Is Lending Club available in my state? That is… Read More »
July 7, 2014

5 Things Everyone Should Do Before a First Interview

After spending hours drafting your… Read More »
June 24, 2014

Lending Club Joins Senator Cory Booker to Discuss Improving Access to Capital for Small Businesses

Read More »
June 20, 2014

Lending Club Named a CNBC Top 50 Disruptor for a Second Year

For the second year in… Read More »
June 17, 2014

PRIME is now Automated Investing

Lending Club is excited to announce that PRIME has… Read More »
May 14, 2014

Why Dana joined Lending Club, or, four things you should look for when you make your next move

Read More »
May 14, 2014

LendIt 2014

LendIt 2014 opened with a bang on Sunday night… Read More »
May 5, 2014

We’ve acquired a company!

Today we’re excited to share the news that we… Read More »
April 17, 2014