In an effort to entice consumers into opening credit card accounts carrying their store’s brand, many major U.S. retailers are increasing the value of these accounts, but some experts warn that problems can still be pervasive.
Taking a cue from Target, the second-largest discount retailer in the U.S., some other national chains are now increasing the value of their store-branded credit card accounts, according to a report from the Chicago Tribune. However, these also pose risks for consumers.
Multiple studies have shown that consumers using store-branded credit cards spend more on these accounts than they would with cash, and applying for them can reduce their credit scores, the report said. The latter is true because lenders tend to view applying for new lines of credit as a sign that consumers are experiencing cashflow problems and may have trouble paying their bills in the future. In addition, these cards tend to have low credit limits.
Before obtaining any new type of credit card, consumers should carefully review any agreement to fully understand the terms of the account.