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FOR IMMEDIATE RELEASE: November 27, 2005
Holiday Shoppers Beware…
NEW SCHUMER STUDY: STORES LURING UNSUSPECTING CONSUMERS
TO SIGN-UP FOR SKY-HIGH INTEREST RATE CREDIT CARDS - UP TO 24%!!
As the holiday shopping season heats up, Schumer asks
New Yorkers not to fall prey to ‘too good to be true’
store credit card deals
Reputable retail stores routinely tempt shoppers with modest one-time
discounts that are quickly erased by shockingly high interest rates
As we rush into the intense holiday shopping season, U.S. Senator
Charles Schumer released a study
today showing that interest rates charged by store credit cards
in New York City are significantly higher than those charged by
bank-issued credit cards. Schumer is calling for increased vigilance
by shoppers to make sure they are not being lured by ‘too
good to be true’ deals in a broad range of stores around the
city.
"A store credit card is like a wolf in sheep's clothing,"
Schumer said. "You might think you're getting a real bargain
at the register but just wait until the bill comes. Consumers could
be in for an unwelcome New Year's surprise if they fall prey to
these high credit card rates. As the holiday shopping season revs
up, shoppers must beware of the pitfalls of these high-rate cards."
According to the Schumer survey,
several retail stores in New York City offer consumers a modest
discount at the register in order to lure consumers into accepting
store credit cards. Typically, these retailers knock off 10 to 15
percent on the first purchase. Those savings can quickly turn into
a big loss if the customer does not pay off the credit card balance
in full each month, or if payments are made late, which results
in additional fees.
Schumer's survey
of 23 New York retailers includes data on store credit card interest
rates and grace periods, including stores selling men’s and
women’s clothing, electronics, furniture, and house wares.
Almost all of the stores charge rates over 20%, well above the average
bank-issued credit card rate of 10-13%.
The highest rate in the survey
was found at Sears, which charges 24.15%, on all purchases on its
store-issued credit card. Six different stores -- Ann Taylor, Express,
Victoria's Secret, Lane Bryant, Abercrombie and Fitch, and Lerner
New York – each offer credit cards at 22.8%. Only four of
the 23 stores surveyed offered an interest rate below 20% -- Banana
Republic, Crate & Barrel, Filene’s Basement, and Kohl’s.
Schumer's analysis
showed that, over time, consumers who make purchases on store-issued
credit cards can easily pay hundreds of dollars more in interest
payments. A shopper who spent $300 using a retail store credit card
with an annual percentage rate (APR) of 22.8% and only paid the
minimum monthly payment on their Ann Taylor credit card would pay
up to $115.28 over 39 months. The average APR for these store-issued
credit cards is almost 22%. Shoppers who charged on their regular
bank credit card would pay far less in interest.
"You don't need to be Albert Einstein to know that higher interest
rates mean bigger bills," Schumer said. "Consumers should
be wary of deals that seem too good to be true. When you sign up
for a store credit card because you’re getting ten percent
off your first purchase – after the bill comes it can turn
into a ten percent additional cost if you don’t pay it off
right away."
Schumer said that consumers must beware of the high rates and urged
shoppers to take steps to protect themselves:
• Shoppers should avoid using store-issued credit cards whenever
possible;
• If a consumer is interested in signing up for a store credit
card, the consumer should be sure to ask the sales representative
about the details of the credit line's interest rate and fees;
• Bills should be paid in full and on-time if customers are
to avoid paying exorbitant interest.
Schumer will send a letter tomorrow morning to the Federal Trade
Commission (FTC), urging the agency to examine the lending practices
of retail credit cards. In the letter, Schumer will ask the FTC
to formally recommend specific steps that retail stores could take
to protect their customers:
• Retail store promotional material should advertise the store's
credit card interest rate and terms as prominently as they display
the initial discount;
• Sales representatives should inform consumers verbally of
the credit card's interest rate, and explain that the rate is higher
than a typical bank-issued credit card;
• Retailers should avoid luring college students and young
adults who do not have established credit ratings into accepting
store credit cards.
Click here to view study.
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