It has been widely advertised by financial experts that department cards have less restrictions on approval than those offered by lending banks and large financial institutions.
That information is not as true today as it was a few years ago when department stores managed their own credit accounts. Technology now makes it possible for retail chains to provide labeled credit cards through major lending institutions in a partnership agreement.
This removes much of the workload from the retailer as the lender who backs the credit accounts processes the applications. The lender makes the decision on approval or disapproval and then provides full management by processing monthly payments, sending late statements, etc.
It’s a winning situation for retailers who previously had considerable liability due to their lower qualification standards. The initial reasoning behind branded department store credit cards was to encourage customers to shop at that retailer’s location by providing credit that could be spent.
The spending limits on department cards are almost always quite a bit lower than a similar credit card you could get directly from the lending bank.
Thus, bank offering to partner with retailers in provide store-labeled cards do not increase risk significantly by approving applications that might not meet traditional standards for credit rating.
The interest rates charged on the department cards are several percentage points higher than on a traditional card.
The retailer pays the lenders fees for the processing of the accounts and pockets the difference between that percentage and the APR charged to consumers.
What began as a way to promote sales of a chain of retail stores is now a money maker for those retailers. It’s no wonder so many stores offline and online are quick to suggest you apply for a department card.
Several of the biggest retailers in the country offer two types of department store cards to be used for purchases.
The first is easier to qualify for than a standard credit card but carries a higher APR and fees and usually has a fairly low spending limit of $1000 or less. Those with good credit will qualify for these offers easily.
If your credit is fair or borders on poor credit, you may be able to qualify for the second type of department store credit card. This card is branded with the store’s log and name but does not carry a MasterCard or Visa backing.
The cards cannot be used in other stores or to buy from other type of merchants but can only be used to make purchases in the particular department store that provides the card.
A Card for Good Reason
The cards used to pay for a large purchase in a particular store are probably easiest to get! Someone who applies for a Lowe’s credit card online or by mail may have a marginal credit score and be denied a new account.
That same person who wants to purchase a $1200 refrigerator in a Lowe’s big box store may get an instant credit approval with the same level of credit rating. To a retail, nothing is more important than making the sale.
Obviously, if your credit is horrible you won’t approved but even those with rather poor credit are often given the benefit of the doubt if the new credit card is requested in order to make one large purchase.
To make the sale, applications that will secure the sale are labeled as “department store cards” and the most likely to be approved even if your credit is a bit shaky.
The easiest cards you can obtain from department stores are those that can be used only in that retail chain’s offline or online stores but cannot be used for buying items from other merchants.
An alternative is applying for a new department store card for the purpose of making a large dollar purchase as the store will go to great lengths to get the applications approved in order to make the sale.
Stay around and feel free to read our guide on low interest credit cards if you have few minutes over.