Watch Out for Walmart Credit Cards

A couple of months ago, Walmart clerks started asking me if I wanted to apply for a Walmart credit card.  At first, I didn’t pay much attention, because many stores try to get you to sign up for their store credit cards, especially right before Christmas.  But, I started to notice they asked every time I checked out and it was getting annoying.  I have no interest in signing up for any new credit cards, especially one with a big yellow smiley face.  

Attention Suckers, I mean Shoppers

Alberta, Canada

Image by MJB84

Wednesday, I figured out why Walmart is pushing so hard to sign shoppers up for their credit card.  I read in Fox Business News the Walmart Discover card now has an annual APR of 22.90%.  This card previously had rates starting as low as 13.90%, but only the highest rates are now available for all new customers. 

I’m not sure why such a consumer-friendly company like Walmart would have such unfriendly interest rates on their credit card.  I suspect they are trying to make up for what is expected to be a tight Christmas season this year.  But, taking advantage of loyal shoppers at Christmas doesn’t seem like the Sam Walton way.  There is definitely a new mantra at Walmart and it is buyer beware. 

New Higher Rates

Right now, everyone should be very cautious when signing up for any new credit cards.  Because of the CARD Act of 2009, credit issuers have a much tougher time raising interest rates on existing cardholders.  So, the strategy is to target new cardholders with higher rates.  Unless you are paying attention when you sign up for a new card, you may get a very unpleasant surprise with the interest rate.  After you ring up a balance, you may be stuck with that interest rate for a long time.  Creditors are way less likely to lower their rates or offer balance transfers.  Those days are over.

Beware of Store Cards

During the recession, shoppers have become much more frugal and it’s starting to affect the bottom lines of most retailers.  So, they are working harder than ever to put merchandise into shopper’s hands, by extending credit.  They offer some nice discounts on the first purchase to sign up for their store card.  They also have loyalty programs to encourage customers to spend more.

Store APR
Sears 25.24%
Macy’s 24.50%
Best Buy 25.24%
JC Penney 26.99%
Nordstrom 10.90-22.90%
Kohl’s 21.90%

As you can see, the interest rates on store cards are criminally high.  Since store cards often have high interest rates and consumer unfriendly terms and conditions, I recommend avoiding them altogether.  Most of these cards are underwritten by Citibank, HSBC Bank or GE Money Bank.  So, the store and the bank are both taking a share of the interest. 

Credit Card Alternatives

Layaway – If you remember the ’70s like I do, you probably remember bell-bottoms, disco and layaway.  My Mom worked at Sears and she was a layaway technician.  She could shop for a family of seven on a very limited budget and she never went into the red.  Sears and Kmart have great layaway programs, to help shoppers avoid using credit. 

Cash or Debit – Going on a cash diet right before Christmas can help start the New Year off on the right foot.  Instead of paying off credit cards for the first half of the year, people could save or enjoy some of that money.  They could skip the New Year’s resolutions about paying down debt and concentrate on losing that holiday weight instead.

Spend Less– The concept of going into debt each Christmas is relatively modern.  Before the 1980s, people rarely used credit cards.  So, they rarely spent more money than they had on Christmas.  In the last 30 years, it seems like credit has allowed consumers to spend way too much.  Kids don’t need 20 toys for Christmas.  Adults don’t need luxury cars or jewelry.  The last couple of years, we have spent less on Christmas and everyone in our family enjoyed it every bit as much.  A few thoughtful gifts are enough.

Would Jesus want people going into debt to celebrate his birthday?

The Bottom Line

The bottom line is that a lot of people are broke this year, because of the recession and high unemployment.  Those who are fortunate enough to have a steady income are paying off debt and saving part of their income.  This hasn’t made the banks or the department stores happy.  They are taking out their frustration on unsuspecting cardholders.

“No man’s credit is ever as good as his money.”  

Edgar Watson Howe – American Novelist  

Recommended Reading

Money Funk – Plastic Wars: Credit or Debit Card?
Invest it Wisely – The Skinny on Credit Cards: A Book Review
Bucksome Boomer – 3 Top reasons to have Credit Cards

This post was featured on the Carnival of Personal Finance over at PT Money. If you aren’t familiar with the Carnival of Personal Finance, you need to check it out. It’s the greatest carnival on the net.

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19 comments to Watch Out for Walmart Credit Cards

  • Money Funk

    Oh, I’ve had this type of CC in the past. I cried when I discovered how much interest I paid on that card not to mention the pain from debt collectors calling me repeatedly. Glad those days are long gone! If you have debt, it might just be best to stay away from credit cards!
    Money Funk recently posted..Stop Living Paycheck to PaycheckMy Profile

    • I remember having a May Company card when I was younger. I used to buy suits there, when I travelled for work. One day, I tried to use the card and they told me that it had become inactive.

      So, I have just used a Visa card ever since. I don’t shop at department stores enough to justify having their card, especially at those interest rates.

  • Hi Bret, those are high rates! I think you nailed it when you talked about the CARD Act. Companies have to disclose more and can’t make sudden changes to your contract, so they have to start with a horrible interest rate. I don’t have a Walmart card although I do have 1 store card I pay off immediately after getting the bill.

    I do remember the 1970s, and having to wait in long lines because they had to look up your CC number in a book. Cash was a lot more convenient then.

    I think Jesus would frown on Christmas debt. He didn’t seem to have many possessions.
    Jennifer Barry recently posted..Will You Retire on Your StocksMy Profile

    • I think the CARD Act was a good thing. It’s not fair to jack up someone’s rate, after they have rung up a balance. I hope consumers balk at the high interest rates of the new cards and they have to bring them back down.

      Going back towards cash and debit is also a good thing. I think consumers are finally starting to figure out the credit trap. There were some good things from the ’70s that were ahead of the time.

  • I have not heard of layaway programs before… that’s interesting. Yep, those are pretty obscene rates! Interest rates are similar in Canada.

    I have one department store credit card, that I almost never use. If you pay off the balances it is not so bad, but I simply don’t want to carry around a bunch of cards and worry about which card I need to use at which store.
    Thanks for the mention!
    Invest It Wisely recently posted..The Skinny on Credit Cards- A Book ReviewMy Profile

    • Layaway was probably before your time. It was really popular before credit cards took off. the funny thing is that it’s making a comeback, because people are trying to avoid using their credit cards.

  • Bret, I’m not a Wal Mart hater. They are a business out to make a profit. Unfortunately, with a large number of lower income customers, they are sometimes creating products and services which may not be “good” for their customers. Capitalism is there to make a profit for owners and shareholders. If they benefit their customers they must benefit themselves or they won’t stay in business long.
    Barb Friedberg recently posted..GOOD DEBTMy Profile

    • I’m not a Walmart hater either. I shop Walmart regularly and I think overall they are pretty good to their customers. That’s why I was surprised with the credit card push. And, I thought the APR on this card was way too high. But, when I did the research for this post, thiers was one of the lowest.

  • Bret, while I do shop at Wal Mart to save (though I don’t care for the stores), I’m not a fan of such high rates. It’s tough out there for many folks, and things like this don’t help.

    Frankly, I think this speaks to the idea of not carrying any credit card balances at all – regardless of store card or otherwise. If you can’t pay it off when the bill arrives, don’t buy the item(s).
    Squirrelers recently posted..Squirrelers Thanksgiving Giveaway ContestMy Profile

    • More and more people are starting to think this way and avoiding credit card balanaces. Unfortunately, there are millions of people who are completely clueless about the interest rates on their credit cards and they are being taken advantage of.

  • Bret,
    Layaways are definitely not before my time, and Kevin and I are near the same age. I guess it just depends on where you shop and whether your family used them. Yes, I heard the skinning on their cards last year. It’s all quite tragic what companies are stoop to in order to stay afloat financially. Thanks for sharing this info!
    Roshawn @ Watson Inc recently posted..7 Step Guide to Financial Peace and Flashin Money Round UpMy Profile

    • Roshawn,

      I think you are right, unless they shop at Sears or Kmart, people probably haven’t heard of layaway. Also, they certainly haven’t been advertising it in the past, like they have this year. I think Walmart also has layaway, which is better than a 22.90% credit card.

  • Layaway is a beautiful thing. I was buying appliances recently and did not want to put it on a credit card, and Sears had a program where I could buy them using layaway. 8 weeks and the appliances are paid off compared to years on a credit card making minimum payments – I think it’s obvious which solution makes the most sense.
    Felicia Gopaul @ College Funding Resource recently posted..Taking the American Opportunity Tax CreditMy Profile

  • Shelly

    I had a Walmart credit card yesterday and I have requested that the account be closed. Not because of the interest rate, but because they took two payments out of my checking account. They of course said it was my mistake. NOT!!! I scheduled a payment to be taken out of my checking account for Dec. 22nd. They claimed I scheduled two payments to come out. Wrong!! Now I have to wait for them to send me a check for the second payment which gave the account a credit that I could apply to future charges. They say that they cannot transfer that money back to your checking account. They can do that, but they won’t. It is nothing but bull crap. My husband and I hate shopping at Walmart as it is a junky store and you can hardly move through the ailses. I would rather shop at Kmart.

    • Shelly,

      It’s amazing how conveniently companies can receive online payments and how difficult it is to get them to give you a refund. Walmart is not the only company that acts like this. Utilities and phone companies are even worse.

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