Photo: By Erik Mallinson on flickr
Thanks to higher production costs in China, parents will be paying more than ever for a slew of popular Mattel toys, Reuters reports. That probably won’t stop your tots from kicking and screaming over the latest Barbie Dream House, but before you cave and whip out that credit card, you might want to take a timeout.
Just about every major retailer offers some sort of credit card today as a way to pump discounts to shoppers and help drive up sales.
In fact, Toys “R” Us just announced today that it’s ditching JP Morgan Chase and starting a new branded credit card business backed by GE Capital Retail Bank.
The new Toys “R” Us cards won’t be available to shoppers until this summer, but it’s kicking up a bit of debate at Your Money about whether it’s a smart idea to go for so-called “co-branded” credit cards. (See the worst credit cards on the market right now.)
They’re not quite like the regular crop of department store cards out there, which you sign up for in-store and pay through the company itself. Co-branded cards are usually backed by a major bank that agrees to create a special card with rewards offerings directly targeted toward driving sales back to the retailer.
Translation: They’re basically a handy little tool used to meet their bottom line.
For that reason specifically, credit card comparison site Nerdwallet cautions consumers against signing up for branded cards.
“Store credit cards are almost never a good value,” Nerdwallet VP Anisha Sekar told Your Money. “Usually, they’ll give 2-3% rewards at their own store, plus 1% elsewhere. Such a narrow bonus category is significantly limiting–not to mention that you often receive rewards in the form of a gift card that can only be used in-store.”
We wanted to see how Toys “R” Us card’s terms stacked up, but a spokesperson hadn’t yet returned a request for information on on the terms of their new card. As backup, we checked this review from Creditforum.com, which examined the fine print.
The toy store’s current card charges a variable interest rate (key word: variable) ranging between 15.24 per cent and 19.24 per cent. Just like Sekar said, the store rewards customers four points for every dollar they spend in-store, but only one point for eligible purchases made elsewhere.
For every $250 you spend (1,000 points), you’re treated to a $10 coupon to be used in-store BUT you’re limited to only three per month.
With an interest rate that high and the incentive to spend in order to “save” at the store, it doesn’t sound like the best deal to us. That is unless you have cause to pick up a few truckloads of Barbies every month.
Sekar agrees: “Unless you spend a disproportionate amount of your budget at that store —let’s say 25% or more, unusual with Toys “R” Us—you’re better off with an all-purpose rewards card that gives more than 1% back on all purchases, or on one that gives rewards on a broad variety of purchases: department stores, say, instead of just at one store.”