This blog contains some simple tips and advice from two regular guys. We're not accountants, financial advisors, or brokers, so follow, ignore, or discuss our ideas as you see fit.

Friday, May 15, 2009

Store Credit Cards: Know What You're Signing Up For

We have a guest post from Matt's wife Leah today. Enjoy!
-------------------------------------Posted by Leah

One of the major department stores (who shall remain nameless) recently hooked us with a “save 15% right now if you apply for a store credit card” offer. Normally we wouldn’t even consider it, but we were making a pretty large purchase and the savings totaled about $30, so my frugal nature won out and I convinced Matt to go for it.

There were several people waiting in line behind us, so I was feeling rushed during the application process. It was very quick, though, and only required a few taps on the buttons of the credit card swiper. Voila! We were approved in about one minute, and I walked out feeling pretty smug about my $30 in savings.

Fast forward to about a week later. We got a letter from the store thanking us for purchasing an additional plan that would help us pay off our balance should hard financial times strike. This plan would cost us $1.60 per $100 of our balance each month. That adds up to an extra 1.6%, added on to an already sky-high interest rate (Matt and I never carry a balance, so we don’t worry too much about interest rates on credit cards).

The letter stated that we could cancel this plan within the first 30 days and wouldn’t be assessed any charges. Of course I did this immediately, and filed a complaint with the company about this automatic enrollment. The representative informed me that I had agreed to this additional charge during my rushed application process, although I had no memory of doing so.

Ok, so it was my bad. I shouldn’t have applied for the card without reading all the small print, but what makes me mad is that the store knows that nobody is going to stand there, holding up the line, while they read through all the terms of use on that tiny screen. They also know that the majority of people, for various reasons, won’t get around to cancelling their membership in the plan within the first 30 days. I believe this is the store’s sneaky way of sticking it to the customer and squeezing that little bit extra out of us.

So what’s the moral of this story? Don’t apply for credit cards? No. Used wisely, credit cards have all sorts of benefits. Don’t apply for a store credit card while being rushed through a checkout line? Maybe…although most people don’t take the time to read the fine print even if they have the time. Be aware that this kind of stuff is happening, ask questions, and read your mail? Definitely!


Paul said...

This reminds of a TV commercial I saw where you could call a number and get a free copy of your credit report.

The TV commercial was during a show I had taped so when the fine print zipped by I was actually able to pause and read it.

Apparently requesting your report through them automatically enrolls you in some sort of credit protection program for like $3 a month. Of course if you call the number and request your report the $3 charges just show up on your credit card statement. It could be months before you notice the charge on your statement, track down what it is, and then find the number to call to cancel it.

I wonder how many people out there have these little charges on their cards for programs they don't even know they have signed up for.

Matt said...

Paul, that brings up the point that people should be reviewing the charges on their credit card and bank statements every month. I actually do it every week so that I'm more likely to remember charges with mysterious names on them.