2

This answer and question refer to "retail revolving account".

  1. What is a retail revolving account?

  2. How is it different than a "general" credit card from a bank?

  3. Is it beneficial to have cards of both "types" assuming all the numbers work out the same?

* Although I can find most of this online, 1. and 2. are not on this site and I don't think 3. is, but the it may be using terminology that I don't know to search for. Thank you!

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In the other question, the OP had posted a screenshot (circa 2010) from Transunion with suggestions on how to improve the OP's credit score. One of these suggestions was to obtain "retail revolving accounts." By this, they are referring to credit accounts from a particular retail store. Stores have been offering credit accounts for many years, and today, this usually takes the form of a store credit card. The credit card does not have the Visa or MasterCard logo on it, and is only valid at that particular store. (For example, Target has their own credit card that only works at Target stores.) The "revolving" part simply means that it is an open account that you can continue to make new charges and pay off, as opposed to a fixed retail financing loan (such as you might get at a high-end furniture store, where you obtain a loan for a single piece of furniture, and when it is paid off, the account is closed).

The formula for credit scores are proprietary secrets. However, I haven't read anything that indicates that a store credit card helps your credit score more than a standard credit card. I suspect that Transunion was offering this tip in an attempt to give the consumer more ideas of how to add credit cards to their account that the consumer might not have thought of. But it is possible that buried deep in the credit score formula, there is something in there that gives you a higher score if you have a store credit card.

As an aside, the OP in the other question had a credit score of 766 and was trying to make it higher. In my opinion, this is pointless. Remember that the financial services industry has an incentive to sell you as much debt as possible, and so all of their advice will point to you getting more credit accounts and getting more in debt.

  • I think your comments in the second paragraph are what I was most concerned with. I will probably wait at least a few hours to accept an answer following SE etiquette. – Zach Mierzejewski Jul 15 '16 at 17:57
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A retail revolving account is essentially a credit card offered by a store (or chain of stores) and usable only at that store. In my area, the Sears department store's "Sears card" would be a good example.

Stores offer these to capture a bit more profit from the transaction. They don't have to pay someone else's processing fees, and they get to keep any interest you pay. Of course they also accept the costs that go along with retail lending.

It operates just like any other revolving-credit card. Read the fine print of the agreement to see what the grace period is, if any, and what APR they're charging after that.

These cards also serve as a marketing tool. Some stores don't accept any other card. Some can do "instant approvals" to encourage you to make a large purchase now rather than continuing to shop around. Some may offer special deals only if you use their card -- I paid 0% interest for a year on my refrigerator, which was convenient for me. And so on.

Gasoline stations also used to offer their own cards... though these days it's common for them to offer a branded version of one of the major credit cards instead.

  • Good, quick analysis of the entire "store card" model! – Zach Mierzejewski Jul 15 '16 at 17:56
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A retail revolving account is a more formal name for a general credit card.

A revolving account is an account created by a lender to represent debts where the outstanding balance does not have to be paid in full every month by the borrower to the lender. The borrower may be required to make a minimum payment, based on the balance amount.

Retail Revolving Account Wikipedia

This is different from something like a car loan or mortgage or other more structured or secured debt.

It used to be somewhat common for very large retailers to issue lines of credit to their customers in the form of a store card. This card was a lot like a credit card but only accepted at the specific retailer. These kinds of cards are all but extincted. Now major retailers will simply co-brand a credit card with a major bank, the differentiation being preferred rewards when used at the retailer.

  • Thanks! So for my credit score, it doesn't matter if I have a "bank" credit card or an "Amazon" credit card as long as I use either appropriately? – Zach Mierzejewski Jul 15 '16 at 17:34
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    Correct. Both of those are retail revolving accounts. Retail, generally, is just the selling of goods and services to consumers. Amazon is a retailer, but so is a home plumber. – quid Jul 15 '16 at 17:37
  • After your edits, let me ask a slight variation: It doesn't matter if I have a "bank" credit card or a Target REDcard (store credit card only usable at Target) as long as I use either appropriately? – Zach Mierzejewski Jul 15 '16 at 18:04
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    They are both "retail revolving accounts." You should pull your credit report to determine whether or not target (or the issuing bank) is even reporting that card. – quid Jul 15 '16 at 18:18
  • That's a good tip! I don't actually have one of these cards. I just want to be informed before opening lines of credit. – Zach Mierzejewski Jul 15 '16 at 18:19
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To add to what others have said, INSTALLMENT CREDIT is a stronger factor when building credit.

An installment credit is essentially a loan with a fixed repay amount such as a student loan and a car loan.

Banks (when it comes to buying your first home) want to see that you are financially able to repay a big debt (car loan).

But be careful, if you cannot pay cash, you cannot afford it. My rule of thumb is that when I'm charging something to my CC, I MUST pay it off when it posts to my account.

I just became debt free (paid off about 15k in CC and student loan debt in 18 months) and I love it.

  • Interesting. I hadn't even thought about that. Yeah, I have student loans, but am not sending in a monthly payment because I'm still in school. I wasn't planning on racking up any CC debt beyond 1% of my limit (and autopay). So installment credit makes up a bigger portion of the "Payment History" 35%? – Zach Mierzejewski Jul 29 '16 at 3:18

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