Got a purse full of plastic? C'mon, fess up. The average household carts around nearly 17 of the buggers, reports industry watcher, including 8.3 forgotten retail charge cards crammed in the recesses of our wallets. Two-thirds of us haven't even dusted off those charge cards in quite some time. They seem oh-so-'90s in these days of Smart cards and encryption chips.

But retailers are out to shake the oldfangled image of their charge cards. And it's about time. During the last decade, they've watched their market share shrink to just 13% of all credit card use. The customers who do use those lines of credit are hardly big spenders -- their outstanding balances are less than one-seventh of those carried on general-use credit cards.

So now you want us to find room in our change purse for Banana Republic's icily neutral charge card? Retailers have realized in the past year that shaving a few Banana bucks off a first purchase is hardly enough enticement to spend the eight extra minutes at the register filling out an application. They're pulling out all the stops to pretty up their charge cards and get us to tap their credit lines -- offering airline miles, upgraded hotel and rental car accommodations, and even donations to local school systems.

Do those perks sound familiar? They should. To get customers to start putting their purchases on their plastic, retail charge cards are being fashioned after their more popular sisters -- rewards cards. Cardholders receive points each time they spend, earning points for gift certificates, free delivery, or a chunk of change off a frozen turkey or Calvin Klein duvet cover.

The makeover is delivering results. According to The New York Times, spending on store cards in 2001 rose 4%, to $125 billion, on top of an 18% augmentation in charge card use the previous year.

Department stores such as Macy's (NYSE:FD) and Bloomies (NYSE:FD) have long been in the lending game. Now specialty retailers -- Gap (NYSE:GPS), TheLimited (NYSE:LTD), and Abercrombie & Fitch (NYSE:ANF) -- issue their own private label (or "proprietary") cards -- credit cards that cannot be used to make purchases at other merchants. In 2002 alone, about a dozen large store chains such as Linens 'n Things and BJ's Wholesale Club (NYSE:BJ), rolled out loyalty card programs.

New plastic on the block
If retail charge cards are too limiting for your tastes, the next time you stock up on the 48-pack of two-ply toilet paper, check out the credit cards being offered by major discounters. Stores such as Wal-Mart and Kmart have done smaller retailers one better by teaming with banks to offer store-branded versions of Visa and MasterCards. These big-boy discounters cast an imposing shadow in the new landscape of plastic.

This past year, the two fastest-growing issuers of bank credit cards were not traditional banks, according to They were retailers. Two retailers, in particular. Target (NYSE:TGT), which owns Retailers National Bank, issued about eight million Visa cards, while Sears (NYSE:S), owner of Sears National Bank, signed up more than 10 million shoppers to its MasterCard. (There's a downside to extending too much credit, as Sears discovered last October, when unpaid credit card balances put a major drag on its bottom line.)

Despite the risks, there seems to be no end to the co-branding craze. Last year, (NASDAQ:AMZN), and yours truly rolled out logo-emblazoned MasterCards and Visas. And just today, the Walt Disney Company held a press conference to talk about its new family-focused Bank One Disney Visa, which enables mom and dad to turn everyday purchases into magical "Disney Dream Reward Dollars." More than 100,000 Disney fans have pre-registered for the card, according to the company.

Expect the morphing to continue. Later this year, Starbucks will try to entice you to carry the first-ever hybrid credit/reward/specialty retailer/stored-value card built by Bank One and Visa. You'll be able to pre-pay for your caffeine buzz by loading it up with moolah, as well as earn Starbucks-centric benefits when you use the card to purchase non-caffeinated merchandise at other merchants who accept Visa. (No, it's not shaped like a biscotti. But wouldn't that be cool?)

The perks offered by retail charge cards and co-branded bank credit cards are certainly improving. You can get free shipping, easier returns, invitations to special store events, and advance notice of sales. But before you take the bait, consider the catches, too.

Higher interest rates: Many store charge cards rates are in the 20% range on outstanding balances. Compare that to the average general-use credit card rate, which is 14%.

Limited perks: Often, the low interest or bonus points only apply to purchases made at that retailer. Before you pay, weigh whether or not you'd be better off earning airline miles or other rewards by using another card.

Pressure to overspend: Trying to earn a gift certificate or percentage off your next purchase? Watch out for the urge to splurge. It's easy to get caught up in a spending spree. But do the math first, and question whether ruffled capris are really an appropriate workplace outfit.

Too many open credit lines: A wallet full of plastic can negatively affect your credit score. While you may not care now, when it comes time to get a loan or refinance your home, you don't want to look like a crazed retail junkie in the eyes of a potential lender.

Penalties: Co-branded cards may be pretty, but the penalties they carry sting just as much as with other credit cards. Read the fine print.

Short expiration dates: Most retail charge cards typically expire after three years.

Before you apply for another card, see if the plastic you already carry offers some perk you can use.

In the meantime, I await the arrival of the card that can find my car keys and take the dog out for her final night's walk. Until then, I'll try to keep the plastic in my wallet to less than one-inch thick.

Dayana Yochim still has a Limited Express charge card she got in 1991. She owns no companies mentioned in this article, as you can freely see in her profile, but is considering collecting offers she gets to wallpaper the hallway. She's crafty like that. The Motley Fool has a disclosure policy.