Very interesting article on Target stores UPDATE p.5

[disneysteve]

I know someone who opens an account just to get the % off, especially if she's buying a boatload of stuff.

This really isn't a bad idea at all as long as you have the money to pay the bill in full when it comes. If you are making a substantial purchase, maybe several hundred dollars, why not get 10% off. Pay off the bill and then close the card. It costs you nothing and saves you $30 or $40 or whatever. Personally, it just isn't worth the trouble to me, but if the purchase was large enough or the discount was large enough, I'd certainly consider it.

 

[disneysteve]

Here is the link to the original Business Week article.

http://www.businessweek.com/magazine/content/06_29/b3993049.htm?campaign_id=search

It is interesting to read the article. Apparently, Target's credit practices aren't quite the same as other retailers and there is some expectation that it might be heading for trouble as a result.

The little story they tell of customer Cathi Austin is really disturbing. Target gave her a big credit line despite her being maxed out, and kept increasing it once she hit the limit. Of course, she's guilty too. What was she doing out buying patio furniture when she owed Citibank 12K. And then still managed to run up another 10K on her Target charge.

 

[deide71]

If you pay the bill in full why does it matter what the rate is? They give me points for each dollar spent toward percent off coupons and contribute something like 2% of my purchases to my son's school, so I really like my Target Card. I spend so much money there that it only made sense to get their CC.

Yep, That's why I use it too!

 

[Brooknwdw]

This really isn't a bad idea at all as long as you have the money to pay the bill in full when it comes. If you are making a substantial purchase, maybe several hundred dollars, why not get 10% off. Pay off the bill and then close the card. It costs you nothing and saves you $30 or $40 or whatever. Personally, it just isn't worth the trouble to me, but if the purchase was large enough or the discount was large enough, I'd certainly consider it.

Yes, that's it...not worth the trouble for me. I don't normally buy that much of anything at one time anyway. Plus, doesn't it effect your credit score to constantly be adding Dept. store cards just for discounts?

 

[dvcgirl]

Here is the link to the original Business Week article.

http://www.businessweek.com/magazine/content/06_29/b3993049.htm?campaign_id=search

It is interesting to read the article. Apparently, Target's credit practices aren't quite the same as other retailers and there is some expectation that it might be heading for trouble as a result.

The little story they tell of customer Cathi Austin is really disturbing. Target gave her a big credit line despite her being maxed out, and kept increasing it once she hit the limit. Of course, she's guilty too. What was she doing out buying patio furniture when she owed Citibank 17K. And then still managed to run up another 10K on her Target charge.

Yes, definitely blame on both sides here. Ultimitely though, we are all adults and responsible for our own financial fitness. What on earth was Cathi Austin even doing *shopping*? Making 17K a year with 12K in CC debt means that you buy food and a few other items required to sustain life.

With the free reign that these corporations have with raising credit limits and interest rates we all really need to police ourselves. Nobody else is going to do it for you. Unfortunately, at this point, without a huge overhaul in banking legislation, I see no end in sight to the carnage.

 

[summerrluvv]

Target isn't the only "relaxed" lender out there. Orchard Bank, Merrick Bank (Hooters Mastercard Product), Walmart, Sam's Club, Dillards, Capital One, Macy's, Bloomingdales, Old Navy, Gap, Juniper Bank, etc. just to name a few are all relaxed lenders as well. The only difference between those lenders and Target is that Target requires 10% of the balance as a min. payment, the other lenders require 3%, so perhaps that's why there is a larger default rate on the Target cards, who knows.

 

[mt2]

Thanks arminnie and disneysteve. Trying to teach the girls about money management is challenging. These sites will help.

Also having IL's and a brother that lives on CC helps. We try very hard to be cash only.

 

[SlightlyGoofy]

Would you offer a drug addict drugs? I am a firm believer in personal responsiblity also and having made my own, pretty small, mistakes when I was young I learned my lessons.

What happens is that these businesses give credit to people who are obviously not going to be able to repay since they are in the volume business and they collect from enough at such a high rate of interest (and also IMHO because they often sell inferior goods at high prices since the people are unable to get credit many other places) that they are raking in the big bucks.

I personally know people who file bankruptcy every seven years and feel no guilt at all about it. It is mind boggling. I would die of embarrassment.

I believe that this house of (credit) cards will come tumbling down one day. Having how long it would take to pay off current debt listed on the bills would be an eye opener to some people.

BTW, I believe opening and then closing credit accounts hurts your credit score and then it would cost you more money as far as your interest rate goes if you want to borrow to buy a car or a house (about the only debt I agree with and I do not even have that anymore).

Whatever happend to the usuary (sp) laws? Those payday loan places are scary also. If they were not allowed to make such huge returns I doubt that they would offer credit to just about anyone and that would improve things a lot.



Slightly Goofy

 

[Jon99]

Correct me if I am wrong (and not to nitpick), the earnings report shows 75% of INCREASED revenue came from credit card operations, from $165M to $196M..

Overall, credit card operations accounted for 35% of net revenue of $554M..

 

[disneysteve]

Correct me if I am wrong (and not to nitpick), the earnings report shows 75% of INCREASED revenue came from credit card operations

The link in my OP said this:
"Businessweek just reported that Target’s latest statement shows that three-quarters of their profits didn’t come from the sale of goods—they came from subprime lending."


The link in the actual article says this:
"three-quarters of the company's 15% earnings gain came from its credit-card operations"

You are correct that those are two different statements. The first one implies that 3/4 of all profits were from lending. But the second says 3/4 of the increased revenue.

It looks like the original link (by Elizabeth Warren who is a pretty good source of financial info) is incorrect.

 

[Jon99]

That said, 35%(and increasing) is still scary...

 

[disneysteve]

Would you offer a drug addict drugs? I am a firm believer in personal responsiblity also

What happens is that these businesses give credit to people who are obviously not going to be able to repay

I agree. What lending criteria can Target, and other lenders, possibly justify to give a woman who earns 17K and already owes another CC 12K (that we know of) a new credit line of 7, then 10 then 12K? That puts her total credit at least 7K more than her poverty-level income. Obviously, Target knew that this woman couldn't possibly pay her bill. Even the combined minimum payments would roughly exceed her annual income if I'm calculating correctly (assuming 2% with Citi and 10% with Target).

So yes, personal responsibility is the ultimate bottom line, but if you give a desperate person enough rope and they hang themselves, I think you share the blame.

 

[Jon99]

I just looked at my Sears card, 31% compared to my Citibank and Chase cards that are still under 10%, explains a little as to why they don't have to be selective..

 

[nbodyhome]

The little story they tell of customer Cathi Austin is really disturbing. Target gave her a big credit line despite her being maxed out, and kept increasing it once she hit the limit. Of course, she's guilty too. What was she doing out buying patio furniture when she owed Citibank 12K. And then still managed to run up another 10K on her Target charge.

I'd looked up the article online yesterday and was shocked more at the woman than at Target. I mean, I love my Super Target, but what can you buy for $10,000??? I guess I just don't go into the right parts of the store.

 

[Lorikr65]

I do the same thing as alot of people here - get the cards for the perks and pay them off each month. Of course I check the due dates and usually pay them off in the store. The one major credit card I have I will pay over the phone from my checking - it gets posted the next day. Sometimes I'll do 2 or 3 payments in a month if I have any extra money (ha, ha!!) - won't have much of that since I back as a SAHM! I only carry a small balance on my major card because it's 0%.

I know some people don't believe in credit cards at all, but I believe in 1 major - in case of emergency (major car repair, etc). I feel comfortable as long as my savings is more than my card - which has been the case so far. I've always said "to each his own" - if someone is having a hard time maybe they have to charge things. There just are so many offers for 0% financing (mailings, sunday coupon section), I would never get any other card. You just have to read the fine print (fees for transfer, etc).

My husband is a police officer and does details at the local, well, they don't like to call it a casino because they only have slot machines, but I call it a casino!! Now that is a scary place!! He sees the same people, waiting for the doors to open, playing 2 machines at the same time, taking cash advances from their credit cards. Some people are so bad they'd rather soil themselves than leave the machines - and they do!!

 

[summerrluvv]

I'd looked up the article online yesterday and was shocked more at the woman than at Target. I mean, I love my Super Target, but what can you buy for $10,000??? I guess I just don't go into the right parts of the store.

That woman probably had the Target Visa..which means it can be used anywhere, not just at Target.

 

[dvcgirl]

See, I LIKE it when they pitch these cards. I can say "no thanks." But every idiot who gets the card and gets stuck with huge interest and late fees is keeping Target profitable, and letting them sell stuff cheaper to people like me.

Target has a profit margin goal. If they don't make it off credit cards, they'll make it somewhere else. That is the way businesses work. I'd rather they make their profit off someone other than me.

I feel the same way about extended warrenties. Go ahead and pitch away. Its just making the product cheaper for me.

I hate to say it, but this whole reality is why only about 1/4 of our generation...the Gen Xers, and even the Baby Boomers will retire well. We're the ones who are avoiding debt and saving/investing like crazy. We always see all of these median numbers for 401K balances, but the reality is that there is a small percentage of people who have very high balances who are pulling that number up....way up. 1/4 of the nation hasn't saved a penny. But that other 1/2 is living right at, or slightly above their means and keeping consumer spending chugging along. And they have very small 401K balances relative to where they should be to retire at 65.

I read an article recently that was sort of twisted, but probably true. This author's premise was that those of us who have saved bigtime should be hoping that the 50% of us spending like crazy *don't* wake up. Because if they do wake up, stop spending and start saving, well, consumer spending will plummet and companies will start to flounder and their stock prices will go right down with it. And down goes our return with it. He actually predicts that this will happen to a certain degree. He believes that some of us Gen Xers will see our Baby Boomer parents really struggle in retirement (he uses the dreaded "eating cat food" scenario) and start saving like crazy. And that in turn will make it even tougher on us Gen Xers when retirement comes.

In other words, how will us savers live really well if we *all* become savers....that's his general premise.

Personally, I'd like to see my fellow countrymen wake up and smell the coffee, but I'm really beginning to wonder if that is going to happen. The generation behind us is going to struggle even more with debt by all accounts. They've had the "debtor's mentality" ingrained them since signing up for their first credit card at 18 in the student union building.

I read a whole lot on personal finance and more and more I see articles about "The New Retirement", or "Not Your Father's Retirement....but It can still be Great!!" Every time I read one I feel like the audience is being set up. *Every* study on the topic shows that a whole lot of Americans are unprepared, but Americans would rather bury their heads in the sand and just not deal with it. You can't sell magazines that way. And so instead of the doom and gloom stories about how pitiful our 401K balances are, these "upbeat" stories tout the glory of a part-time job at age 70. You know the story, "Joe Average, 68, was a software engineer his entire life, but now he works at Epcot Center in Orlando Florida for extra spending money". They'll quote Joe..."I enjoy the interaction with the people and the part time benefits help cover the gap in my health coverage."

I always wonder if Joe Average is *really* so happy about his $7 an hour job at Epcot, or if he's just doing what he has to do. I just finished a book called "Green with Envy, Why keeping up with the Joneses is Keeping us in Debt", and it in the author makes an interesting point...

"Since many boomers have managed to keep their expectations high while not preparing to support themselves in retirement, the solution, mixed with denial or panic, is to keep working and keep earning, and to to hope that the opportunities don't run out. Some of the boomer rhetoric is that the generation is unstoppably energetic, that they wouldn't *want* a golden-years-style retirement on the golf course. That could partly be true, but more likely we're seeing a psychological phenomenon of retrofitting: Faced with a reality, we not only adjust to it, but start seeing it as what we wanted all along. It's a coping mechanism that is well suited to boomers over age 50."

This is what I see happening....

 

[nbodyhome]

I always wonder if Joe Average is *really* so happy about his $7 an hour job at Epcot, or if he's just doing what he has to do. I just finished a book called "Green with Envy, Why keeping up with the Joneses is Keeping us in Debt", and it in the author makes an interesting point...

Many of those who are working at Disney for $7 an hour are either college program, just starting out in their careers, are retirees, or are doing a second job at Disney because the enjoy it - or often, it's a second income in the household. There are certainly people who stay at $7 an hour, but I don't think that most do.

As my Uncle Bill used to say "it's not what you make, it's what you keep". I've known people who made very little, but saved a lot. I've also known people who make great incomes and blow it all. Of course, there are some - like the woman in the Target article - who have as much consumer debt (not including cars or mortgage) as they do a yearly income. And I know that from past experience, once you have a lot of credit card debt, it really snowballs with interest charges.

I didn't realize that the Target card was also a Visa - I don't even pay attention, I have never had an interest in one. Being asked about it all the time tends to turn me off. I have more than enough credit cards (4?) with 2 of them having no credit being used on them.

 

[MrsPete]

Not only does Target make alot of money from consumers, but also from their vendors. They charge fees for everything....a few hundred dollars for a shipment not arriving on time. A couple of hundred for an item being out of stock...and on and on. It's amazing how many fines they charge their vendors, which usually adds up to a million or so in a year. This is only from one vendor.......

I read a very interesting article about grocery store "fees" a couple years ago. A manufactuerer -- Coke, for example -- pays a fee to be allowed to place its product in the Food Lion store. For a small fee they can have their product placed up high or down low. For a larger fee they can place their items at eye level, or they can have a whole "top to bottom section" or even an end cap.

The store brands don't have to pay these fees, so that's one reason we can buy Food Lion sugar for so much less than Dixie Crystals sugar.

That's also why the little guy has such a slim chance of introducing a new product -- he can't afford to compete with the big boys and their deep pockets, so his product isn't noticed.

 

[disneysteve]

Many of those who are working at Disney for $7 an hour are either college program, just starting out in their careers, are retirees, or are doing a second job at Disney because the enjoy it

I think dvcgirl's question was of those retirees, how many are there because they want to be and how many are there because they have to be.

I have many elderly patients, and by elderly I mean 70s and 80s, who are still working full-time because they have no other choice. One woman is a waitress at a diner and still works night shifts, 11pm to 7am. Does she want to be doing that? Absolutely not. But she's stuck financially. Another guy does maintenance work for an apartment complex. The work is physically demanding and hard for him to keep up with, but he needs the money.

What everyone is wondering is how many of the boomers and X'ers are going to wind up in the same situation because of poor money management in their working years.