In Minnesota and throughout the rest of the country, it is getting tougher for retail stores to survive. It seems that more retailers are declaring bankruptcy and/or going out of business every day. So, what should Minnesota consumers do if the retailer attached to their store-branded credit card calls it quits? Depending on the type of the card and the bank underwriting the credit card, you may have a few options. Just be cautious about closing the account because this could have a negative impact on your credit score.
Minnesota Store-Branded Credit Card Holders are Still Responsible for Balances When Stores Go Out of Business
Some Minnesota consumers may think that if the retailer associated with their store-branded credit card goes under, they are no longer responsible for paying their balances. However, this is definitely not the case. The credit card may bear the store’s logo, but all store-branded credit cards are underwritten by a bank. So, when you use these credit cards to make purchases, you don’t owe the stores money, but the banks.
Therefore, if you stop making payments on your credit card, you will incur late fees and credit score damage. Eventually, the bank will charge off the account, and cause a derogatory mark to appear on your credit reports that will stay there for seven years. Also, it’s likely that your credit score will fall significantly, and debt collectors will start calling.
It’s important for Minnesota credit card holders to pay off balances on store-branded cards attached to failed businesses first. Then, they can take the next step, which may or may not include closing the account.
Possible Options for Minnesota Store-Branded Credit Card Holders Whose Stores Go Out of Business
Some Minnesotans with store-branded credit cards can use these cards at any retail location. This is because their credit cards are technically major credit cards bearing a retailer’s logo. On the other hand, other types of store-branded credit cards are “closed-loop” cards. This means that consumers can only use them to purchase goods from the retailer associated with them.
If you have a closed-loop credit card from a retail chain that is going out of business in Minnesota, make sure that the entire company is, in fact, closing. Sometimes retailers close just certain stores, or, all of the brick-and-mortar stores, but they may still maintain an online presence. If this is the case, you can keep using your store-branded credit card to make online purchases.
Yet, if the whole company goes under for good, one of two things may happen.
1 – The underwriting bank automatically closes the account.
If this occurs, make sure that the account is listed on your credit reports as “closed by lender.” This will minimize the impact on your credit score. Still, keep in mind that any time a credit card account closes, it could negatively affect your credit utilization rate because you automatically have less available credit.
2 – The underwriting bank assigns your account to another retailer.
Most banks underwrite dozens of credit cards, so they have plenty of retailers from which to choose. Unfortunately, though, Minnesota consumers don’t normally get to choose. So, if this happens, you can either keep the credit card account open or close it. Again, if you close the account yourself, depending on your situation, it could really hurt your credit score. In order to make the best decision, you should request copies of your credit reports to figure out whether or not you could stand to lose the account.
Other Reasons for Minnesota Consumers to Check their Credit Reports
All Minnesota consumers should check their credit reports at least every 12 months. This gives you the opportunity to look for signs of identity theft or simple errors. Surprisingly, about 80% of consumer credit reports contain inaccuracies of some kind, and some of these mistakes can bring down credit scores.
If, after looking over your credit reports from TransUnion, Experian, and Equifax, you find that you are the victim of identity theft, or if you spot errors, call Credit Repair Lawyers of America in Minnesota. Our experienced credit lawyers will fix your credit reports quickly and for FREE.
The Free and Legal way to Get Better Credit
Don’t let fraudulent accounts or errors on your credit reports bring your credit score down. At Credit Repair Lawyers of America, we’ve been cleaning up credit reports for consumers since 2008 for free. How do we do it? The law allows us to collect our fees and costs from the defendants in any successful action. This is why our clients pay nothing for the work we do.
Let’s start the conversation about what we can do for your credit. Set up your free consultation today by calling Attorney Gary Nitzkin at (612) 235-4458 or sending him a message through our contact page.
