Merchant issued credit cards are credit cards that are issued by merchants instead of by banks. Typically, they offer very attractive terms, but often the card can only be used toward the purchase of items from the merchant themselves. Merchant issued credit cards come in many types, all designed to stimulate you into buying more from that particular merchant. Merchant issued credit cards cut across all economic strata. For example, high-end stores like Macy’s and Barney’s offer their own credit cards, as do low-end companies you’ve never heard of who allow you to shop by mail exclusively through their special offers.
These low-end merchants typically issue credit cards to people with poor credit histories so that they can make money from people with poor credit as these people try to rebuild their credit rating. After all, it is no secret that in order to rebuild bad credit you have to re-establish credit, often having to resort to a secured credit card. Many of these low-end merchants issued credit cards are issued to people who could not get unsecured credit any other way.
The high end cards, on the other hand, are primarily offered by retailers to people with good credit, so they have to compete favorably with the kind of credit offers that people with good credit can typically get. Often, they will offer low annual percentage rate (APR) credit cards and even zero APR credit cards. Be aware, though that while you will pay no interest on purchases form the merchant, it most likely only applies during the introductory period and after that will go up to a standard rate.
Buying things with merchant issued credit cards is easy (quite possibly too easy), but applying for one isn’t always easy. When you apply for a merchant issued credit card, you need to be aware of what information you will have to give them and why you need to give it in order to complete the credit card application. Any inaccuracies in the information you give to the merchant will delay the approval process or even lead to you being denied credit. The other reason the merchant needs this information from you is so that they can check your credit score. Your credit score is the single most important factor for creditors choosing whether or not to issue you a credit card, and what the terms will be.
Be sure to find out what your credit score is before applying for merchant issued credit cards. This score is trusted in the credit industry as an indicator of what kind of borrower you are going to be on your past borrowing habits. How much you have borrowed in the past, how much debt you already carry, and your payment history are all looked at and analyzed. If you shop often at a particular merchant, or you just need to rebuild your credit, merchant issued credit cards may be the way forward.
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