Retailers typically offer various sales and promotions during the holiday shopping season. And you might need financing to take advantage of such deals. Sales clerks may then tout the advantages of their store cards as the answer to your financing needs. But what if they sign you up for a store card without your knowledge?
For instance, reader Karen writes, “Hello I recently bought a table set at Ashley. I was told I could make payments depending on my credit score, so the lady checked if I would be approved for the monthly payment option. Today I received a credit card. I have not activated the card because I was never told I was applying for a credit card. My credit score is 747. It dropped 5 points; it used to be 752. I’m thinking of canceling the account since I don’t shop at this store and I won’t use the credit card. There is no fee, a high interest rate and I can only use it for that furniture store. The card has a $3,000 credit (limit). However, I need some advice as to what I should do.”
Pitfalls of store cards
It seems it has become standard operating procedure for salespeople to pitch their store cards when you go to checkout. They will try to tempt you with offers of big discounts and rewards when you use the card. They will say that you can take advantage of a significant discount for a purchase you are about to make anyway. Those might be the advantages, but these cards have their pitfalls, too.
One big drawback to these cards is that they offer limited shopping access. Typically, they can only be used at the named store, or its affiliates. And their interest rates tend to be higher than those on other types of credit cards.
They could offer you a “deferred interest” promotion, which means you won’t have to pay any interest on your balance while this promotion runs. However, if you haven’t paid off your entire balance by the end of the promotion period, you will be in for a shock.
At that time, you will be assessed interest on the remaining balance retrospectively, going back to the time of the purchase. Essentially, interest will be deferred, but it could be charged back if you do carry a balance after the promotional period ends.
Truth in Lending Act protections
A retail store, or any card issuer, cannot issue you a card without your express permission, per the Truth in Lending Act. Issuers can only approve you for a card if you made an oral or written request or put in an application for the card. They can also issue you a card without your express permission when it comes time to renew your current card, or if you need a substitute for an existing card.
There have been instances of the Consumer Financial Protection Bureau receiving complaints from consumers saying that they received store cards in the mail even though they declined offers to open these accounts at the store or over the telephone.
This could happen if you shared personal information, including your Social Security number, with store personnel. They could have gotten this input from you on some pretext and then used it to approve you for the card without your knowledge. This sort of misuse of information is considered fraud.
Containing the damage
If you don’t want to hold on to the card, you should call up the issuer and ask to have it canceled. And you should follow up with the credit reporting agencies to make sure that the account is off your record. The three major agencies—Equifax, Experian and TransUnion—are offering consumers free credit reports once a week through April 2022. And you’re entitled by law to at least one free credit report from each of the three major bureaus per year.
If there remains a record of the unauthorized account on your credit report after you asked for it to be canceled, you should file a dispute about this matter with the credit bureaus saying that you did not authorize the account. And also tell the card issuer to stop reporting the account to the credit bureaus.
The bottom line
Karen, the store should not have issued you a card without your express permission. The store personnel probably used any input you provided without specifically informing you that you were applying for a store card. And the store’s hard inquiry into your credit situation likely caused the dip in your credit score.
You should call the card issuer and tell it to cancel the card. And then check your credit report after a suitable interval to make sure the account is off the report. In case there is any issue, you could follow up by filing a dispute with the credit reporting agencies. You could even file a complaint with the CFPB. Hope this issue is resolved to your satisfaction!
Contact me at firstname.lastname@example.org with your credit card-related questions.