Will your store credit card survive ‘retail apocalypse’?

Its fate depends on the retailer’s business plans and decisions made by the bank that issues the card. (Pixabay photo)

Stroll your local mall and you may spot some empty storefronts where mannequins once stood draped in the latest fashions possible casualties of what some have dubbed the “retail apocalypse.”

Not everyone agrees it’s all doom and gloom for brick-and-mortar stores, but challenges certainly exist. Major retailers have announced plans to close thousands of locations in the U.S., and the final tally for 2017 could number around 9,500 stores, according to projections from Fung Global Retail & Technology, an industry think-tank .

But just because a store turns out its lights doesn’t mean the end is also nigh for your store credit card. Its fate depends on the retailer’s business plans and decisions made by the bank that issues the card. The better you understand the process, the better you can manage your credit and keep it in good standing.

WHAT MIGHT HAPPEN

The impact of a retail closure on store credit cards may vary by situation and issuer, according to David Boone, head of U.S. partnerships at TD Bank. TD Retail Card Services issues private-label credit cards, which can be used only at a particular store, as well as co-branded credit cards, which have a Visa or MasterCard logo and are widely accepted.

When a store closes, any of the following may happen regarding your store credit card:

You have to shop online to use the card. If a store moves sales online, you can continue using your private-label store credit card on its website and making your payments online, or by phone or mail. Of course, this also means you may incur shipping costs. If your card is co-branded, it should still be accepted by most merchants.

The card issuer offers you a new credit card. When a retailer goes out of business entirely, the rewards program eventually goes with it. “Most issuers will attempt to find a replacement product or reward value proposition for the customer,” Boone says. Replacement products might include a cash-back credit card or one with a 0 per cent introductory APR offer.

The issuer closes your card. You store card may be shuttered completely along with the store. In this case, you might be notified about a rewards expiration date. Private-label credit cards are more likely to be closed because they can’t be used anywhere else.

The issuer sells your credit card account. Most banks, Boone says, would prefer to retain relationships with existing customers. But the issuer does own your debt and can therefore sell it to another issuer. If that happens, the new issuer is required by federal law to alert you to any significant changes to the terms with a 45-day advance written notice, according to Nessa Feddis, senior vice-president for consumer protection and payments at the American Bankers Association.

Keep your contact information updated in case an issuer needs to notify you about changes.

POSSIBLE IMPACT ON YOUR CREDIT

Regardless of what happens to your favourite store, you must continue making payments on your card or risk damaging your credit score.

Your credit can suffer if you or the issuer close the account, but the impact depends on how long you’ve had the card and how much of its available credit you’re using. Both are factors in popular credit-scoring models.

“If a consumer closes a card that has a lengthy credit history, or one that represents a large part of their credit utilization, closing the account can have a large negative effect on his or her credit score,” said John Danaher, president of consumer interactive at TransUnion, in an email. (TransUnion is a NerdWallet business partner.)

If the card is newer or has a low credit limit, any negative impact “will likely be small and temporary,” he adds.

If an issuer closes your account, check your credit report to make sure it’s documented correctly.

YOUR OPTIONS

You don’t have to sit around and wait for the sun to set on your store credit card; you can seek out a better match. Many credit cards with broad acceptance also offer benefits such as rewards and introductory interest-free periods.

An application for a new credit card can ding your credit score because it triggers a “hard pull” from the issuer on your credit report. But it’s generally a temporary dent, and it may be worth it if you find a card that works for you.

Check your credit score in advance so you can apply for cards in your credit range and improve your odds of approval.