Fingerhut: Is This Credit Building Program a Good Deal?

Are you trying to rebuild your credit? Fingerhut, an online retailer, says it wants to help with its FreshStart program, a new twist on the old “catalog card” offers that have come and gone over the years.

Designed for customers who have been turned down for Fingerhut’s credit card, it gives customers a second shot at proving their creditworthiness so they can qualify for Fingerhut’s regular credit cards.

But is it any good? Here’s how Fingerhut describes the program:

• Fingerhut FreshStart® is an installment credit program.
• You begin with a one-time purchase. This purchase is between $50 and your credit limit. You can choose the products you like in your price range.
• You make a $30 down payment when you place your order.
• You pay off the balance in six or eight easy monthly payments. You may pay it off even faster, if you’d like!
• When you’ve paid off your balance, with each monthly payment on-time, and in full, you graduate to a regular (revolving) WebBank/Fingerhut Credit Account with a larger credit line.
• It’s that easy. There’s no catch. You are simply rewarded for being a good Fingerhut customer.

This program looks like a more legitimate version of “catalog card” programs that are marketed as credit cards for rebuilding credit, but can only be used to shop from the issuer’s catalogs. With those offers, the merchandise is often severely overpriced and customers usually find little benefit in rebuilding their credit.

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Fingerhut, on the other hand, has a popular catalog that has been around for a long time and has a loyal following among its customers. Presumably some of those customers have been hit hard by the economic downturn, so much so that they are turned down for Fingerhut’s traditional credit card program. To keep them shopping, Fingerhut came up with this program. From that standpoint it’s brilliant; they don’t have to turn shoppers away. (It’s probably also no coincidence that the program is launching at the start of the holiday shopping season.)

But the biggest concern for customers is that they will just focus on the small down payment and monthly payments, and lose track of how much they are really spending. When they do, they’ll pay interest. So instead of buying an item on sale, they are paying more by the time the bill is paid off. The interest rate is 24.99%, which is not unusual for a retail card or credit cards for those with bad credit, but it’s high compared to the average credit card rate of about 15%.

And you may not be able to get out of paying at least some interest on purchases. While the marketing materials says purchases can be paid off faster, the terms and conditions warn:

However, if you elect to pay your entire balance due at the same time as your down payment, then this will cancel your Loan and you may not be eligible to be considered for a WebBank/Fingerhut Credit Account. You may not be eligible to be considered for a WebBank/Fingerhut Credit Account if you die, file for bankruptcy, enter a consumer credit counseling service program, make any past due payments, or have any payments returned unpaid, or if you enter any other negative credit status. (Emphasis added.)

Customers who don’t read the offer carefully may miss the fact that they are not building credit with anyone other than Fingerhut when using the FreshStart program. They must pay off purchases under this program on time before graduating to the regular card. It’s not designed to be a way to build credit references with the major credit reporting agencies.

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This program is fairly new, so I haven’t heard complaints about it. I also haven’t heard many complaints about their credit card, which may be due to the relatively small number of cardholders who carry it. When I searched the web for Fingerhut complaints, I found a few such as this one:

Calling and harassing wife who has had a massive stroke over $19.17 the total amount for the product is 130.00+ interest!. It is difficult for my wife to speak, yet this person insisted on talking to her and kept her on the phone while he kept making mistakes concerning the issue. She cannot hold a phone at any length of time and speaking is extremely hard for her. We are on Social Security and send our payments per money order yet if it’s not there on the date they require, they call and harass my wife.

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So what’s my take? If you really love shopping at Fingerhut and you can’t qualify for one of their credit cards, then you may want to try the Fingerhut FreshStart program for rebuilding your credit. Limit yourself to a small purchase of something you’d buy anyway and pay it off as quickly as you can. But if what you really want is a credit card to rebuild credit, get a secured card and pay the balance in full each month.

Image: shawnzrossi, via Flickr

Tagged as: bad credit, credit building, credit card, fingerhut

Gerri Detweiler Gerri Detweiler is Credit.com's Director of Consumer Education. She focuses on helping people understand their credit and debt, and writes about those issues, as well as financial legislation, budgeting, debt recovery and savings strategies. She is also the co-author of Debt Collection Answers: How to Use Debt Collection Laws to Protect Your Rights, and Reduce Stress: Real-Life Solutions for Solving Your Credit Crisis as well as host of TalkCreditRadio.com.