Store Card Advice?

[Anonymous]

Hi there,

What's the advice on store cards and how they impact credit scores overall? I have a Macy's Department Store Card that I opened up as soon as I graduated high school, so while my AAOC is 1 yr 9 mos, this card is upwards of 6 years. It's also my highest credit limit, makes up about 15% of my revolving credit. While I am an avid Macy's shoper, there aren't any real perks aside from the coupons. Nothing I would mind losing out on if it meant better credit scores.

Do co-branded cards such as my Chase Amazon and CitiBank Best Buy cards also count as store cards? Unlike the Macy's credit, I can use these cards wherever/however I want. I'm currently in grad school so I take advantage of the 5% cash back on Amazon and the Best Buy card has helped me finance a lot of stuff for school such as my laptop and different software. I also intended it to keep building up my CL on that card so when the day comes to finance appliances, I have that option. Are these cards adverse to my credit score?

[Anonymous]

The insurance industry uses a non-FICO scoring model in which the presence of store cards is penalized.  We could not say for certain that your Macy's card, however, causes you to be penalized in this non-FICO model -- it depends on what the rest of your profile looks like and this scoring model is not well tested by the folks here (for many reasons).  Even if there is a penalty it might not be much.  And if you are taking a scoring penalty, it might not be affecting your insrance premium, which is the only real concern. 

In the FICO models there is no penalty for having store cards.

Because this card is your oldest open account, and because with FICO there is no problem with store cards, I would not close this card.  BTW, can you confirm that this is your oldest card?  And if so how much older is it than your next oldest?

Some store cards (according to forum veteran Thomas Thumb) are treated as "charge" cards by FICO, and it can be hard to tell if that is the case simply by inspecting the report.  It's easy to test, however.  Have all cards except for the Macys report $0 (with Macy's reporting a small balance).   Pull your scores after you have gotten it that way (check your reports first to be sure).  Then have one more card report a small balance.  If your scores go up 15 points or so, that means the Macys was being treated as a charge card and was not helping you in terms of utilization.

If a card has both a store logo on it (e.g. Best Buy) and a major CC logo (Visa, Mastercard, Amex, Discover) then it is NOT treated as a store card by FICO (or the insurance industry).

[Anonymous]

So in the reports I pulled today it says this is a "charge account."  

<img src="https://imgur.com/inKQ5eI"><img src="https://i.imgur.com/inKQ5eI.png" />

I don't know what that means, if I'm honest. I just used it to buy two new mattresses for my apartment. If it's a charge account, doesn't that mean I have to pay the balance in full? I've always have revolving credit on this card since my purchases tend to be large things...

[HeavenOhio]

It's a revolving account. Even if charge card is noted in one field on your report, revolving should also be noted in another spot.

[Anonymous]

Hi DaJat12.  You are right that a "charge" card is a card that you have to pay off the balance in full after each statement.  This is in contrast to a "credit" card -- where you can the balance off slowly over many months.

I'd sharply separate in your own mind two things, as touches the charge card question:

(1)  What will the issuer permit me to do? 

(2)  How does FICO interpret the card?

You can call a customer service rep if you like to answer the first question.  If your statement shows a a big balance but also indicates a "minimum payment" that is much smaller, then as far as your payment relationship you can pay it off over time.

As far as the second question, FICO 8 might see the "charge card" categorization on the report and decide to exclude it from your normal CC utilization calculation.  FICO 8 does that with other charge cards -- such as some of the cards issued by Amex.

As I suggested earlier, the only way to know is to test it.  I gave you a simple method earlier that will work.  Let me know if you didn't understand it.