The Truth About Store Branded Credit Cards
You hear it all the time at the checkout counter. “Would you like to apply for a (store name) credit card?” Sometimes it seems as if every store now has its own store branded credit card that their customers can use to purchase products at their locations or other locations around the city. These credit cards are typically billed as a fantastic deal for the consumer, but are store branded credit cards really the deal that they are said to be?
Discounts Associated With The Credit Card
Most of the people that sign up for store branded credit cards do so because the store is offering a deal or a discount with the approval of the credit application. This discount is applied to the purchases made on the day that the application is submitted. Although this can be a significant amount if you are purchasing a large quantity of items, the money that is saved during the initial transaction is often dwarfed by the amount of interest paid on the balance of the credit card during the first year that the account is opened.
Limited Amount Of Credit Available
The amount of credit given for a store branded credit card is typically much lower than the amount of credit issued with a general purpose credit card that can be used anywhere. Because the credit limit is so low, often under $1,000, it is very easy for a larger purchase to cause the person to use more than 40% of their available credit, which can negatively impact their credit score. The only thing that will restore the credit score points lost by maxing out a store branded credit card is paying the balance down below that 40% threshold.
Usage Restrictions
In many cases, a store branded credit card can only be used at the stores that issued them and on the website of the company. Unfortunately, many people do not do all of their shopping at a single store and must get multiple store branded credit cards to be able to use credit in each of these places. Having several credit accounts with several different retailers increases the chances that a payment date will be missed and can result in penalty fees and higher interest charges.
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