Merchant credit cards, also known as private label credit cards, can develop more sales for merchants, and might promote loyalty in customers. That is, unless the credit card company stabs the customer in the back. We received a report from a customer of David’s Bridal. The David’s Bridal credit card is managed by HSBC. We know HSBC is famous for processing payments as late payments, but now there is a new twist. Here is how the scam works:
When a payment is received, either as a mailed payment or a bank-processed bill payment, HSBC can reject the payment. In the case of David’s Bridal, the customer was told that the account number was incorrect. HSBC claimed the customer had, therefore, presented a bad check. Logic dictates that this assumption is predicated by the fact that the payment was rejected. Nothing indicates that the check was returned for insufficient funds. Now for step two of the scam:
HSBC claimed the next payment would not be accepted because they (HSBC) would not accept checks from the customer for 30 days. The net result would be, as a minimum, two $15 phone payment fees, which are considered as new purchases. The default credit card interest rate would apply, since new charges result in a balance due. Here is what the David’s Bridal customer had to pay:
“So now we will have to pay the $15 rush payment fee, a late payment charge, and $25 returned check fee, interest for December AND January, interest on the $15 rush fee payment, and a late payment fee for January because they WONT LET US MAKE A PAYMENT for 30 days. We are a young couple and don’t have time or money to waste on this the month before our wedding.”
Does this process benefit HSBC? Certainly, and it reflects poorly on HSBC, HSBC Finance, and David’s Bridal. Does David’s Bridal need the money so bad that the company is willing to sacrifice reputation for an extra dollar? In a 10-K filing with the SEC the company said “We are involved in litigation that we believe ordinarily accompanies a retail business. We do not believe that any of our pending or threatened litigation will result in an outcome that would materially adversely affect our business.”
Do we recommend the David’s Bridal credit card? The answer is no. Without reservation, and with no uncertainty whatsoever, we DO NOT recommend starting life together, as newlyweds, with any credit card from HSBC.
See the entire customer report here
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