Store Credit Cards: The Pros And Cons

Store Credit Cards: The Pros And Cons

You’re at the checkout counter at your favorite department store and the clerk asks if you’d like to open a store card. You hesitate. They sweeten the deal by offering you 15 percent off your purchase. What do you do?

Here in this post I’ll provide an unbiased view on store credit cards.

Store credit cards are just one way that businesses make money. The clerks are trained to push the plastic cards in hopes that frequent customers sign up and rack up the balances. Often, cards come with high interest rates which will mean more money for the store.

If you’ve ever been tempted to get a store card, take a moment to read the pros and cons of the convenience items below.

Pros of Store Cards

Store credit cards aren’t as bad as you may think and many come with nice benefits to entice customers into signing up.

One of the biggest draws are the discounts. You’ll get an initial kickback of 10 to 20 percent for the day.

At certain stores, like Target, the discounts keep coming. Target card members get 5% off each time they use their red card.

Some stores partner with major credit card companies which means you can use the card elsewhere as a regular credit card.

You can also use a store card to fix credit issues. By making small purchases and consistently paying them off, you’ll help establish good credit or beef up your credit score.

Store credit cards are also easier to get, so those with little or no credit have a better chance at qualifying and bettering their credit profile.

At some stores, such as Nordstrom and Victoria’s Secret, cardholders get reward points for every purchase. These points can then be redeemed for free items.

Finally, some stores offer special financing options on big purchases. If you’re planning on making the purchase anyway, a store card can be a great way to get 0 percent interest while you pay off the item.

Cons of Store Cards

While there are some nice advantagees to having a store card, there’s also some distinct disadvantages. It’s important to weigh both the pros and cons when deciding if a store card is for you.

The biggest drawback to a store card is the possible high interest rate. If for some reason you buy more than you can pay off, you can be looking at an APR of nearly 30 percent. While you may be drawn in with an initial 0 percent financing offer, if you don’t pay the card off in time you’ll quickly be hit with high interest charges.

Some store cards can only be used at the store they were issued at. The limited flexibility is often coupled with a low balance limit meaning you don’t have as much purchasing power as you thought.

Applying for a store card will also put a ding in your credit. Just applying for the card means the retailer has to pull your credit score. Adding a balance to the card can also put a dent in your credit if you have other balances that are outstanding as well.

My Opinion

I think store credit cards are great, but only if used responsibly. The disadvantages I’ve mentioned can be negated if you pay off the balance each month.

I have an Amazon store card and have a good interest rate, high credit limit and they have a great rewards program. I get 3% cash back on Amazon purchases, 2% on gas and restaurants and 1% everywhere else.

I’m considering getting a Target card, as I shop there a lot and the extra 5% off every purchase can really add up. They also offer a debit card version which is even better. This way it’s not even a credit card at all, it just links to your bank account and you still enjoy 5% off.

What about you? Do you have any store credit cards?

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