Merchandise Cards are a form of Secured Credit Card, usually. If you are already familiar with what a Secured Credit Card is, you can skip this next paragraph.
A Secured Credit Card is a type of Credit Card that is made for people in the worst credit situations. You wouldn't want to use a Secured Credit Card unless you had an awful credit score and no way to get an unsecured credit card. Such cards are called “Secured” because there is a sort of security deposit placed on them, like when you rent a property. You pay the full cost of the card to the issuer ahead of time, so that if you miss payments, you can't really cost them money. You could consider that money collateral for a loan, but there's even less of a guarantee that you will get it back.
Merchandise Cards, like Secured Credit Cards, have high APR's and are designed to help people build their credit. If your credit is just awful, or even non-existent, you can apply for a Merchandise Card as a way to free yourself from the chains of debt. In order for that to actually work, though, you need to be as responsible as possible with your payments. Just like with Secured Credit Cards, a Merchandise Card issuer will send regular reports based on your payment records to one, two, or all three of the major credit bureaus. Your credit score can jump a considerable amount if you make your payments as expected, and more than the minimum payment. It takes discipline and a lot of money, far more than the credit you are given, but the kind of loans you can get after you have rebuilt your credit will make it worth it. This will be especially true if you plan on getting a car or house loan in the next few years.
Merchandise cards can vary a lot, depending on how much trouble your credit is in. Don't expect to have thousands of dollars loaned to you for one of these cards, think more in the hundreds range. Many issuers will advertise five hundred dollar minimums or other similar numbers. If you do your research well, you may find a card with a credit limit that can increase to the small thousands; if you are willing to stick with a card with a through-the-roof APR that long. Be careful to avoid getting trapped by a Merchandise Card.
A Merchandise Card will feel like a nasty trap at first, but the starting restrictions you face are necessary for you to get your credit back. One restriction may be that you can only use your card at one store. Another restriction would just be your credit limit, or the fact that you can only use it on certain types of purchases. You should understand that a Merchandise Card is not the only way you can repair holes in your credit, and the alternatives may or not be better for you. Merchandise Cards require a lot of start-up money, but probably offers the fastest credit recovery around. You can accept the offers of nearby credit unions easier than living with the bonds of a Merchandise Card, but there is no guarantee your credit score will respond as quickly. Do your research before you make a final decision, though.