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Retail credit cards may trap unwary consumers

Virtually every inhabitant of Rockland County has received at least one offer of a retail credit card - that is, a credit card offered by a retailer instead of a bank. While the cards offer certain advantages, they now come with very high interest rates, some higher than 30 percent per annum. People who accept these offers often find themselves faced with a mountain of credit card debt after a few years of use.

Retail credit cards, often referred to as "store cards," have been around for years, but they have become more popular as attached perks attract shoppers. Some cards offer a 20 percent discount on the first purchase, in-store discounts, free shipping and cash back on future orders. Some even offer deferred interest if the customer's balance is paid in full within a given period. For retailers, the cards are a source of extra revenue. According to one report, Macy's made 39 percent of its $1.9 billion profit from credit card fees.

The trap with store cards is the high rate of interest they bear. Some cards charge interest rates that are twice as high as standard credit cards. One chain of appliance stores charges an interest rate of 30.49 percent; other store cards charge interest rates as high as 29.99 percent. Some stores also collect retroactive interest, which significantly raises the cost of an item. One bankruptcy lawyer described a client who was paying off a $100 coat over five years after the purchase because of rapidly accumulating interest.

Retailers often present the offer of a store card when the customer is checking out. The customer does not have time to carefully consider the offer and frequently accepts the card without knowing anything about its terms. Anyone who has accumulated several of these cards and the resulting debt that often comes with them may wish to talk to an experienced bankruptcy attorney about various methods of discharging the debt or making an arrangement to pay it over time.

Source: Magic Valley, "Retail credit cards increasingly come with perks - and a 25 percent interest rate," Abha Bhattarai, Oct. 24, 2017

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