Senator Schumer Warns against Store Credit Cards

NEW YORK - After spending $100 at Macy's this Holiday shopping season, it is likely the cashier will ask you if you want to if you want to sign up for a Macy's credit card and get 10 percent off. Be careful. What the cashier isn't telling you is that the credit card has an interest rate of about 22 percent—9 percent higher than what the average shopper would pay on a regular bank credit card.

"It's a season of holiday cheer, but New York shoppers better be careful," said Sen. Charles Schumer (D-NY), while standing in front of Macy's at Herald Square on Nov. 27. Sen. Schumer, known for his scrutiny of credit card companies, came out to warn shoppers of what he is calling "a wolf in sheep's clothing."

A visit to Macy's website reveals the difficulty of discerning just what the interest rate is for Macy's credit card. The rate is only mentioned in confusing fine print sentences and at the top of their "Terms and Conditions" in obviously blurred lettering. Readers will likely click the box "I have read the terms and conditions," and continue without really knowing what they've gotten themselves into.

Schumer presented a survey of big name stores offering high interest rate credit cards. The highest rate in the survey was Sears, at 24 percent. Other big names with high interest rate cards include Macy's, Ann Taylor, Express, Victoria's Secret, Lane Bryant, Abercrombie and Fitch and Lerner New York. The only store that doesn't hike interest rate seems to be Kohl's, which maintains a normal 12.99 percent rate for its credit card.

Many New Yorkers have already figured out what is going on.

Queens resident Hammad Sartaj, who worked at Best Buy and Circuit City, said, "I know how it works they charge you zero percent interest for the first year and then they stick you with 25 percent interest… You become an indentured servant to the credit cards."

Chris Elie, a life long resident of Long Island, said, "It's really just a big money-making scam."

When offered store credit cards, Chris said, "I always tell them I already have one even though I don't… otherwise they keep asking you and try to be a good salesman." In the 90s, Elie worked at a department store called Stern's, which later merged with Macy's.

Chris Wells, who works and shops in Manhattan, said, "I usually sign up for the credit card to get the 10 percent discount then I never use the card."

This year, store credit card interest rates are higher than in past years, according to Schumer's research. "It is getting worse every year. The stores make more money on interest than on the purchase itself," said Schumer.

Schumer said he battled with banks for eight years to get them to include up-front information about credit cards' interest rates and late fees. Now, he wants the same from stores issuing credit cards.

Schumer, a member of the powerful Senate Finance Committee in Washington, DC, is sending a letter to the Federal Trade Commission urging the agency to examine the lending practices of retail credit cards. He is sending his own recommendations on how to improve them. Schumer wants to see store's promotional material and sales representatives advertise their interest rate and terms as prominently as the initial discounts that come with the cards.