Yippee! Nordstrom, the high-end retail chain, just bumped up the credit limit on my Nordstrom credit card from $800 to $2,800, a 250 percent hike. However, I don’t know that this is much cause for celebration.
Sure, I’m flattered – if that’s the right word – that Nordstrom (or, more precisely, the issuer of the card, TD Bank) values me so much as a customer and that my credit record apparently justified raising my credit limit. Without me asking, I might add. But all that extra spending power isn’t as attractive as a Hugo Boss power suit.
What’s behind this ugly truth? Two things:
1. I don’t envision racking up $2,800 in apparel purchases at Nordstrom, as much as I’d love to stock my closet with boxes upon boxes full of my favorite New Balance sneakers. When I do put a charge on my Nordstrom card, I typically pay off the balance before I receive the next month’s bill. That way, I avoid interest charges, which leads me to my next point…
2. Out of curiosity, I checked the purchase APR on my Nordstrom card (which I should have known already). Shocker: It’s a whopping 23.65 percent – the highest APR for a Nordstrom card. The card’s lowest APR is a far more palatable 11.65 percent. Time to call Nordstrom/TD Bank and negotiate a lower APR! To make matters worse, the penalty APR, which kicks in if your payment is at least 60 days overdue, is 30.65 percent. Whoa.
Regarding that 23.65 percent APR on Nordstrom purchases, I shouldn’t be too horrified. A CreditCards.com survey taken last fall found the average APR on credit cards offered by the country’s largest retailers was 23.84 percent, and nearly half of retail-branded cards carried an APR of at least 25 percent. Ouch.
Clearly, Nordstrom wants me to spend more money at its stores and is enticing me with a higher credit limit. But I’m not biting. Because I know how treacherous retail-branded credit cards can be.
During the week of June 26, according to a CreditCards.com survey, the national average APR for new credit card offers reached a record high of 16 percent. While that rate may be one for the record books, it’s still well below the 23.65 percent APR for my Nordstrom card.
Translation: In most cases, it’s much less costly to charge that Hugo Boss suit on a regular, lower-interest credit card than a retail-branded, higher-interest card – unless you remain committed to always paying off the balance on a retail card before even a penny of interest accrues.
If, however, you regularly carry a monthly balance on a retail-branded credit card, you’re in danger of paying too much for your merchandise, thanks to the typically lofty APRs for these cards.
So, thanks, Nordstrom for trying to tempt me with an ego-stroking higher credit limit, but I’m not going to buy clothing that I don’t really need, and in the process, crank up my balance to $2,800. After all, I don’t want to lose the Nordstrom shirt off my back.
See related: 4 reasons to say “no” to a store card offer, Exclusive perks can make retail store credit cards a good deal,