An overview of the pros and cons of store credit cards from the customer's perspective can be found here. Store credit cards are rarely effective without offering some sort of incentive to lure shoppers. Says one customer quoted in the story:

I don't get a card unless it offers a special discount -- 10 percent off or something. I use them if there is an incentive.

And many customers are savvy enough to take advantage of the initial offers and then pay down their balances promptly and avoiding interest charges. So why are stores offering credit cards? Customer loyalty:

Talbots customers who sign up for a store credit card receive 10 percent off any purchase during their birthday month, first notice on sales and what Talbots calls "appreciation dividends," a $25 store credit for every $500 they spend in a given year.

The information exchanged at the point of sale is, in the long run, worth more than the money you are receiving because it will fuel future sales.