MY FINGERHUT…

Fingerhut.  Depending on who you are and how old you are, the very mention of the name conjures up one of many specific images.

I remember the Fingerhut catalogs of the 1970s.  They weren’t as thick or interesting as the Christmas catalog from Sears or the even glossier one from Penney’s.  The merchandise selection was limited and not much, if any, of its contents appealed to a kid.

My mom liked it, though.  They sold those latch hook rug kits (hey, I told you it was the 1970s) and she’d order the patterns and the stubby little bundles of yarn you used to make them.  Fingerhut would send them, along with a payment book.

That book consisted of a dozen little slips of paper.  Each of them had a payment amount printed on it, along with the Fingerhut mailing address and the buyer’s account in formation.  Once a month, when my folks gathered around the kitchen table to “do the bills,” they’d take out the booklet, tear off the page, attach a check for the amount and send it off to good ol’ Fingerhut.

A little research confirmed that memory.  Those payment books divided the total price of the items purchased (and an interest payment) by twelve.  You had a year to pay off your balance.  It was old school closed end credit.

That’s the Fingerhut I remember.

“In the old days, retailing would have a lot of layaway plans and the local store credit. All those things disappeared over time. And what Fingerhut provided was that access, that credit.”

A Minnesota Public Radio report that details some of the struggles the company faced during a transitionary period in the 1990s includes comments from Rafael Saldana, who was once Fingerhut’s manager of Hispanic Business.  He explained the role the closed credit system once played:

TIMES CHANGE…

Eventually, Fingerhut went through some changes.  They were bought out be a larger retail outlet and started focusing more on online endeavors and order fulfillment responsibilities.  They were still mailing out those catalogs, but they were different, too.

The latch hook rugs and the ugly orange 1970s yarn faded from the front to the back to obsolescence.  The catalog got a little beefier and started featuring electronic items, baby gear, jewelry and all of the other product lines you’d find in a department store.

The biggest change was probably the elimination of the old Fingerhut closed credit system.  They started issuing Fingerhut credit cards and set up revolving accounts.

The aforementioned MPR report will tell you that people weren’t necessarily pleased with the changes.  Old customers started running up bigger bills and people questioned the new ownership’s decision to change the way business had long been successfully conducted.

THINGS STAY THE SAME

Even though Fingerhut did switch to the revolving credit system, like most other retailers, they didn’t change one aspect of the way they conducted their business.  As Rafael Saldana noted, Fingerhut had also made a point of extending credit to those who may not have access otherwise.

That’s something they’re still doing.

Fingerhut extends credit to people who otherwise couldn’t get a credit card.  Their standards are set intentionally low.  They even make a point of trumpeting the fact that they “Often say, ‘YES’ when others say, ‘NO’”.

They do more business online these days, but they do sell a little bit of everything and they sell it on credit to people with surprisingly low credit scores.  They’re the retail equivalent of a sub-prime lender.

NOT QUITE CRAZY

At face value, this strategy might seem a little crazy.  Why would you let people who have a strong risk of defaulting on their purchases buy on credit?  Why would you do that with lower-priced consumer goods that can’t meaningfully secure the debt?

Well, it’s not quite as crazy as you think.  Fingerhut seems to have a plan.

They charge a nice, hefty interest rate to make up for the risk.
They build some of the risk into their business model by charging a bit more than you’d expect for the items they sell.
Much of Fingerhut’s inventory consists of second-tier brands and non-name brand items.
Fingerhut positions themselves as a means of accessing credit for those with limited opportunities.  They undoubtedly hope their “last chance”  lender status will encourage people to maintain their accounts responsibly and that they’ll be utilized by those interested in credit repair or establishing good credit histories.

SHOULD YOU BE A FINGERHUT CUSTOMER?

I’ll be frank.  Most of us probably shouldn’t become Fingerhut customers.  The prices aren’t great (although they do offer some nice sales and online coupon codes) and the product line isn’t any more impressive than what you’d find at a K-Mart.

Plus, based on what I can tell, they don’t even sell those ugly latch hook rugs anymore!

Does that mean that no one should be a Fingerhut buyer?  Not necessarily.

The one thing Fingerhut has going for it is its willingness to extend credit where others won’t.  That’s even more impressive in today’s credit line-cutting marketplace.

That makes the company uniquely valuable to a certain sub-set of the population:

People who want to build a credit history on the cheap. You could apply for a Fingerhut card, make an occasional inexpensive purchase when items go on sale, pay the bill promptly and develop some credit history.  The fact that approval is likely and the fact that it’s easier to resist running up a Fingerhut card than it is a Visa or Mastercard–or a locally available physical store, for that matter–creates one reasonable scenario.

People who believe that a card will help them repair their credit. I belong to the school of thought that believes the best way to deal wit a lousy credit score  is to pay everything off  and to then avoid credit purchases whenever possible.  I’d be reluctant to tell anyone who reaches the point that they can only qualify for Fingerhut credit to even think about becoming an active borrower.  Not everyone feels that way, though.  Those who think that limited responsible use can help boost credit scores may want to recommend applying for a Fingerhut card.

You really like the stuff they sell and you’d like to buy some of it. I’ve been pretty harsh in my criticism of Fingerhut’s inventory and that might not be completely fair.  Different people like different things and have different views of what constitutes quality.  You can see that wide-ranging difference of opinion reflected in the side range of reviews Fingerhut receives online.  If you like what the company sells, feel free to become a customer.  I don’t see why that would justify an application for a Fingerhut card, however.

SOMEWHERE IN THE MIDDLE…

People who can’t get credit anywhere else can often qualify for a Fingerhut card.  You can view that as a creepy, predatory business practice or you can see it as a commitment to providing credit opportunities to those who’d otherwise be frozen out.

People get Fingerhut products and use them.  You can see that as a reflection of the company’s offerings and as proof that people are responsibly using their cards for smart purposes.  Or, you can imagine a bunch of people who should be saving their money mortgaging their future for second-rate consumer goods.

The truth of the matter probably falls somewhere in the middle of that mess.

I can’t say that I would recommend anyone to apply for Fingerhut credit.  I’d understand their motivation if they did, however.