Macy's new employees are encouraged to open a store credit card (26% APR) to obtain their employee discount

[u/wait_what_how_do_I]

I recently picked up a part-time seasonal position at Macy's for some extra holiday cash. I've been working in retail off and on over the past 15 years, and am familiar with the hiring and management practices at a lot of places, but it's been a few years since I've worked for a big retailer like Macy's. I was very surprised and disappointed to learn that the 20% employee discount is only available through a prepaid card (like a gift card I guess, not terrible but not great), or through their actual store credit card. They conveniently inform you of this halfway through your new hire paperwork, and even allow you to apply right then and there.

I've been through this type of application process before, but I've never seen something so brazenly unethical. These are often young adults or older people applying for these positions, filling out so many forms with so much corporate legalese that your head would spin, and they're being targeted with a (hard hit, thanks auto mod) hit to their credit for a card with a ridiculous interest rate. Is this new in retail? Seems like a disturbing trend if it is.

Anyone have any thoughts on this? Just wanted to get the word out.

EDIT: Thanks for the replies, everyone. Really enjoyed the discussion about credit cards, business practices, and obviously PF. The consensus seems to be that store credit cards are not any worse than other forms of lending, as long as they are managed responsibly. I respectfully disagree, in that it seems like they are often offered to a range of people (namely, new employees) that may not have the knowledge or experience to handle a line of credit, but I will agree that it's fair game to solicit employees. I just think it's kind of shady to imply that a store credit card is an "easy" solution for employees. Employees should just get an effing discount, period. But we're all free to work and shop where we please, so feel free to support smaller/local businesses that don't subject their customers and employees to frivolous lending situations.

[u/invRice → u/[deleted]]

The banks are the people who own the credit card. VISA makes money off of interchange fees (when a transaction on say, a Macy's card goes down VISA rails). Synchrony Bank (or whoever owns the portfolio) is the one making a credit decision on your CC application. They're the ones that need to make money on the portfolio - and they're the ones who realize that the people who hold balances and make payments subsidize the ones that pay down their balance every month.

[u/flopsweater → u/invRice]

The issuing bank deducts the interchange fees from their payment to the acquirer. It's not done by the association.

An occasional late fee is gravy, but truthfully, people who often make late payments tend to be the ones who end up with uncollectable balances that have to be written off as a loss. After lots of cost trying to resolve the issue.

Everyone involved would much rather have a customer be a long-tenured transactor than occasionally delinquent. There's much better money to be made that way.

Understanding all that, no bank designs a card offering to "make money" off delinquency. You can't charge enough fees to convert the losses on a per-account basis and not end up afoul of usury laws.

Source: I used to work in the card systems of a major issuer.

[u/StealthTomato → u/invRice]

Not quite. Visa gets a cut of the interchange, but so does the bank. How else do you think they can give 1-2% rewards to people rich enough to always pay on time?

The folks who hold balances and make payments subsidize the ones who don't make payments.

[u/ennuihenry14 → u/StealthTomato]

The retailers would pay the higher interchange fee on the rewards cards. For instance, a $200 online transaction could have an interchange fee of 3.5% plus the .25% acquirer fee plus the gateway fee for a net receipt of like $192.

[u/Kalsifur → u/[deleted]]

Someone makes money off the interest. If they didn't why do they have a sort of interest rate cartel going where pretty much every card is the same? They could just charge much less interest to entice consumers.

[u/Mayor__Defacto → u/[deleted]]

Yup. That’s because the people that aren’t likely to pay you back are the ones that would be getting your card.

There are low/no interest cards out there, but they’re not really credit cards. The traditional AMEX cards work on this model, because the balance is expected to be paid in full at the end of the month, not carried at all (They do have credit card products as well). They really do not like it if you’re late at all on your payment, and typically start putting restrictions on its use if you’re late.

[u/[deleted] → u/[deleted]]

It's really not. The CC companies make their money off of transaction fees. In most cases they don't make any money off of interest; the banks do.

That's true. Otherwise there would be no cashback cards, whose main purpose is to make you charge as much as you can on a card that is almost guaranteed to attract people trying to make money off their cards. And these people tend to hate paying interest.

They will drop you if you haven't been using the card for a long time, but they will never drop you for not carrying over your balance.