Store Credit Cards: Good or Bad Idea?

store cardsGenerally speaking, there’s nothing wrong with compiling credit cards in order to obtain extra saving (miles, points, rewards, etc.), as long as you use them responsibly and take efforts to ensure that you don’t get in over your head with debt. Having and maintaining a good credit score requires you to use credit, so if you’re going to spend money anyway, there’s absolutely no reason you shouldn’t use cards for regular purchases. That said, there are some extra considerations to be made before you opt to apply for credit cards in every store you shop at. Here are just a couple of ways in which using such cards could be to your benefit, as well as a few reasons you may want to skip adding the extra plastic to your wallet.

The best reason to get a credit card that is affiliated with a particular store is to obtain an extra savings. Many of these cards come with a small discount every time you use them in-store or online (usually something like 10%), but the company may also send out additional member coupons on a regular basis, host special events for card-holders, or even take an additional percentage off some items simply because you’re paying with their store card. This isn’t the only reason to secure such a card; in addition to earning saving at the places you shop the most, they also help to build your credit so that you can apply for better cards (or loans) down the road.

Unfortunately, these benefits are tempered by a lot of caveats. The first is the interest rate, which is often higher than your average card. Although you are probably getting a store discount for using the card, if you fail to pay off purchases in a timely manner, the interest will have you paying more (sometimes a lot more) than you stood to save. In addition, many of these cards are managed by the company itself (or a contractor), rather than a recognized creditor. This means that “technical problems” can occur frequently and be extremely difficult to remedy. Customer service representatives may be hard to reach or limited in their ability to help resolve issues with payments, credits, and disputes. Start asking around; you’re likely to find several friends and relatives who have gone down this road with department store credit cards (and cancelled them as a result).

But even if your card works fine and you have no problems on the billing end, you could end up with personal problems, for a couple of reasons. First of all, you have to be disciplined if you’re going to carry several credit cards. It can be tempting to shop at a store just because you have a card that gives you a discount, even if there’s really no reason to go in. And if you’re spending more than you can reasonably expect to pay off in a month, you’ll quickly find yourself in hot water with your creditors (and your credit report).

In truth, these store cards can be like nothing so much as bad credit loans, with up-front incentives but high interest rates. Even credit cards for poor credit are often better than the bum deal you might get shopping on store credit. Instead, think about getting a regular card with a low rate and a rewards program that gives you money back to spend wherever you want. It’s really a better deal all around.

About The Shopping Mom