Is the Babies R Us credit card a bad idea for your newborn?

Q: I’m a regular reader and know you’re not a fan of store credit cards. But I would like to know if the Babies R Us MasterCard would still be bad idea if I’m expecting? I am five months pregnant and since this is our first baby, there will be a lot of stuff to buy.

A: You probably saw this table on the application which compares their regular card vs. MasterCard vs. R Us rewards program:

R Us MasterCard vs regular card

Be careful, because the comparison of 2 points versus 4 points is misleading. In a moment, I will explain why.

Whether you should apply or not depends on two things. Ask yourself these two questions…

Question #1: Do you pay in full or make payments over time?

Previously, Chase was the issuer of this card. When they were, the interest rates were more reasonable.

Now for 2013 the issuer/manager of the card is GE Capital Retail Bank. They issue credit cards for dozens of stores and aside from having a reputation of subar customer service, they’re also notorious for charging ridiculously high APRs. As of the time of this review (June 2013) this is what they charged:

APR on "R" Us cards

So whether you have the regular Babies R Us credit card or the MasterCard, you’re going to pay nosebleed interest rates.

Now I know they offer 0% promotion on new accounts, but it’s quite sneaky because it’s an either/or type of deal: you either get deferred interest OR the 15% off first day’s purchase… you don’t get both.

fine print about either/or offer

The exact financing offer will vary, but all of the “no interest” ones use same as cash terms. That means it’s not true 0% interest. Instead, you get deferred interest.

The purchase which is financed under this offer will have to be paid off entirely during the specified time (6, 12, or 18 months). If you do pay it off during that time, that’s great because you won’t get charged any deferred interest.

However if you don’t pay it off during that time, then your credit card will be charged the interest retroactively for the entire time. Worse yet, the back interest is not just calculated on your remaining balance, but rather the full amount you financed on day one.

And during the promotion you better make your payments on time because if you don’t, GE Capital reserves the right to revert the offer.

I strongly advise against getting this card for financing because of this “deferred” interest that you might experience. Instead, go for one of these cards that give 0% on purchases.

But if you always pay your credit card bills in full every month, then this isn’t applicable. If that’s you, then your interest is in the rewards program, which brings us to the second question…

Question #2: Did you read the fine print on the rewards?

The say you earn 4 points per dollar spent at Toys and Babies R Us in the advertisements on their website. But did you read the footnotes?

Only half of those points come from the credit card. The other half comes from the Rewards R Us rewards program, which is 100% separate from the credit card. That’s just their store loyalty program to earn points.

So really a more accurate way to describe the credit card is that it’s earning 2 additional points per dollar at their stores and if you have the MasterCard, 1 point per dollar elsewhere.

Is that a bad deal? Sort of.

Since 500 points = $5 to spend at their store, each point is worth a penny. That means you’re earning 1% on regular purchases and 2% at their stores. That’s hardly exciting for a store card, especially since some major credit cards give 2% rewards everywhere you shop.

The only rewards scenario where it makes sense to apply for the Babies R Us card is if you really plan on milking the 15% discount.

If you strategically plan in advance, you could buy all of your baby clothes, toys, crib, and other gear all in one fell swoop. If you did that and were spending $2,000+ on the first day, then the 15% will probably be worth it since it would be worth a $300 discount.

But keep in mind the diapers, formula, and other things are excluded, so it could be difficult to rationally and wisely spend a large amount in one day.

reward exclusions

I don’t even think the 15% discount is worth it if you’re spending as much as $500 or even a $1,000.

Why? Because 15% of those amounts are $75 and $150, respectively. That is comparable to the bonuses sizes you see on many bank cards (and some sign-up bonuses are even higher). Conclusion? Skip the credit card application for Babies R Us unless you plan on spending thousands (yes, thousands with an “s”) on your first day.

Conclusion? Those with good credit should look elsewhere

My guess is that this offer is targeted at demographics with not-so-great credit scores. Because anyone with a good credit history can get something better than the Babies R Us card.

But if you do have bad credit and need a no annual fee card with financing, then by all means this might be the best thing you can get. If that’s the case, go for it. I would also encourage you to check out these cards for fair credit scores. Their requirements are lower than most cards.

This review was written or last updated June 21, 2013

The responses below are not provided or commissioned by the bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by the bank advertiser. It is not the bank advertiser's responsibility to ensure all posts and/or questions are answered.

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