Released: October 08, 2006

Store-issued plastic—for better or worse

Source: By David Lazarus, San Francisco Chronicle

My wife and I had a rare disagreement the other day after I learned that she’d signed up for a credit card offered by a major retailer.

ME: You don’t want to do that.

HER: But I got a discount for what I bought.

ME: It’s not worth it considering everything else that could happen.

HER: What could happen?

To be honest, I wasn’t entirely sure, aside from general concerns about plastic and privacy. So I figured I better take a closer look at this—if for no other reason than to preserve marital bliss in my own home and those of others facing similar situations.

According to industry estimates, the market for proprietary or private-label credit cards tops $100 billion annually. Many major retailers offer credit cards to customers either through their own financing arms or via third-party issuers.

The lure for customers is usually a 10 percent discount off the initial purchase on the card, followed by special notices of upcoming sales and the chance for other rewards.

“Let’s say a retailer sees from your card purchases that you’re someone who likes Armani,” said Mallory Duncan, general counsel and senior vice president for the National Retail Federation. “It might let you know in advance whether Armani clothes are going on sale. It wants to encourage loyalty.”

But there are some significant downsides to single-store plastic.

“It’s a classic case of being pennywise but pound foolish,” said Linda Sherry, a spokeswoman for Consumer Action.

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