American shoppers know the routine: slide a big purchase up to the cashier's desk and get an invitation to apply for the store's in-house, instant approval credit card. Except, lately, something's different. Those instant approvals seem harder to come by in the months following the credit card industry's total restructuring. Account holders lucky enough to get a green light might be disappointed at lackluster credit lines. New banking rules threaten to put the brakes on most in-store credit card programs entirely.
Most lenders must now seek independent verification of an applicant's personal income before opening a new credit card account, according to the New Haven Register's financial blog. A handful of credit card issuers can access this data through independent agencies, but few applicants have had their income verified recently enough to qualify. Since few shoppers want to hand over their pay stubs to checkout clerks, many banks have shifted away from instant approvals to waiting periods that include income checks. Retailers worry that shoppers will make fewer impulse buys without access to instant store credit.
Instant Approval Credit Cards Offering Smaller Credit Lines
Credit card applicants with pristine credit histories may still be surprised at the anemic credit lines offered by store-branded accounts, the New York Times reports. Many store cards have evolved into little more than frequent shopper tracking cards. Consumers pay balances quickly, often transferring balances to cards with higher credit lines and lower interest rates. To gain that loyalty, retailers no longer need to offer credit lines as high as bank-branded cards. They must simply offer just enough credit to justify using the store card on that initial sale.
However, store credit cards with small credit limits can do a number on your credit score. A fresh account lowers the average age of your credit lines, while a high balance on a low credit line can inflate your credit utilization ratio. Both situations can cause your credit score to drop low enough to disqualify you from the best home refinancing deals, auto loans, or insurance products. If a store credit card's discounts and perks can really save you substantial amounts of money, they can be worth pursuing. Otherwise, says WalletPop's Lita Epstein, rely on the plastic already in your wallet.