What 2017’s Retail Apocalypse Means for Store Credit Cards

Rachel Morey
November 13, 2017
Retail Stores Closed

National media calls the closing of 20 giant retailers in 2017 retail apocalypse. Big names like The Limited, J.C. Penney, Macy’s, and Abercrombie & Fitch couldn’t keep up with competition from online giants like Amazon and are closing some of their physical locations.

Shutting down many brick and mortar locations while focusing on their digital sales efforts represents a big change for retailers that formerly operated thousands of physical stores across the country.

Nearly 7,000 stores closed their doors in 2017. That new record rises far above the 6,163 store closings in 2008’s financial crisis. What does it mean for store credit cards?

Empty store fronts in the mall don’t necessarily mean an end to all brick and mortar locations. Many businesses involved in the 2017 retail apocalypse are restructuring and refocusing their marketing efforts in a move to better compete online.

People who use store-branded credit cards may have fewer options when it comes to in-person shopping, however. Private-label credit cards can only be used at the affiliated retailer. When a local store closes its doors, shoppers in the area must shop online or stop doing business with that retailer.

If the company ceases to exist online and in brick and mortar locations, card holders will be notified about expiration of rewards. If the issuer decides to close the account, it could influence the card holder’s credit score. Depending on how old the account is and how much of the available credit is owed, there could be a small dip in the FICO scores of cardholders.

Store credit cards typically have high interest rates, so now is a great time to shop around for better terms. People who carry a balance on store-branded cards pay as much as 29.99% APR.

Recently, Comenity Bank changed their term of service to eliminate the grace period. This means that as of May of 2017, customers pay daily interest regardless of whether they pay their bill in full each month or not. Comenity Bank provides store-specific credit cards to many companies, including Victoria’s Secret, Bed Bath and Beyond, and Meijer.

There are two main reasons people apply for store cards. They are trying to build credit and store cards have relatively low acceptance standards, or they open the account to save money on their purchase as part of an introductory offer.

With the holiday season upon us, even stores that are closing locations all over the county may roll out sign-up promotions. Unless their store-branded credit card is co-branded with a Visa or Mastercard logo, allowing card holders to use it anywhere that accepts credit cards, think carefully before signing up.

It may be a better idea to apply for a credit card that offers cash back rewards and a lower interest rate. Closing revolving credit accounts and applying for new credit cards cause a temporary dip in FICO scores. Choosing a credit card company that offers more versatility minimizes the need to switch cards in the future.

Store card holders who have low credit limits or who recently opened an account with a retailer that is on shaky ground won’t see much of a negative effect to their FICO score if they decide to close the account.

Even if the company that owns the card closes completely, the bank managing the line of credit may offer an alternative card to keep customers. The bank also has the option to sell the debt to another financial institution. If this happens, they are required by Federal law to notify cardholders 45 days in advance of the change.

Considering the number of retailers that are closing the doors to their brick and mortar locations, now may be a good time for consumers to take a close look at the cards in their credit file and shop around for a card that better meets their needs.

See all posts →