Should I Apply For A Store Credit Card?
Every time you go to the check out line at certain retailers, you hear a specific script being read asking you if you would like to save a percentage off of your purchase by signing up for a store credit card. Employees at these stores are required to ask anyone that is not already paying for their purchases with a store credit card if they would like to spend several minutes applying for a credit card and approval can typically be granted within a matter of minutes. But are these store credit cards really the deal that they are advertised to be?
The Discount
In most cases, the company will give you 15% to 30% off the total price of your purchases on the day that you are approved for the store credit card. More generous stores will also send you discount cards and gift certificates throughout the year as an appreciation gift for using the credit card in their store. The amount received is generally based on the amount that you spend in the store.
Unfortunately, the interest rates that are charged on these store credit card are often much higher than the interest rate charged by banks and the major credit card issuers. This means that carrying a balance on these credit cards can end up costing you much more than you are saving in discounts from the store. If you are making a major purchase that will take you several billing cycles to pay off, it may be cheaper to place the purchase on a different credit card and forgo the discounts the store is offering.
Balance Limits
Store credit cards will generally have a much lower balance limit than general purpose credit cards. This can cause harm to your credit score as the percentage of credit you are using for each of your credit cards factors heavily in the calculation of your credit card. It is much better for your credit score if you place the purchase on a credit card with a higher limit than maxing out the store credit card.
Convenience
One of the biggest drawbacks to the store credit card is that it can only be used at a specific retailer. This is good if you tend to do all of your shopping at that store, but people that shop with several different retailers often must get a different credit card for each retailer, which leads to multiple payment dates and an increased chance that you will default on one of the cards to trigger a higher interest rate and late charges. Many people prefer to obtain one credit card with a higher limit that can be used anywhere rather than multiple store credit cards that can only be used in one place.
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