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Pros and Cons of Store Credit Cards

Article by MaryLou Walston

While paying for your purchases at your favorite clothing store, the cashier asks if you are interested in saving 20 percent on your purchases for today. ‘Of course’, you think, ‘who would turn down a deal like that?’ You reply that you are interested, and the cashier asks you to fill out an application form for their store credit card. Is this a good idea? Before you fill out that form, make sure you know the good and bad sides of getting a department store card.It is always better to start with the bad news, especially if you think you know all the good news anyway. Store cards tend to have very high annual percentage rates, or APR. These could get as high as 18 or 19 percent, which is significant, especially if you look at the APR you have on your regular credit card. Having such a high interest rate can be detrimental if you do not pay off your credit card balance each month, so if you are simply not disciplined enough to do that, a store card is not for you.Sometimes, a department store will have a store credit card available but do not tell you that it does not have revolving credit. This means that you must pay the balance off each month anyway, and it also means that you do not get credit (pardon the pun) for being a responsible accountholder. If the card does not have revolving credit, your credit score will not be impacted positively OR negatively either way, so it is honestly pointless to get the card. If you want to improve your credit score by opening a new line of credit at a store, make sure they have revolving credit, and make sure you are on time about paying.You may be excited to spend that money on your new line of credit from your favorite store, but be very clear on just how much you are allowed to spend. Many stores offer very low credit limits, which makes the card, for all intents and purposes, useless. You should make sure you know what you are getting into before signing your name on the dotted line, because having too many open lines of credit can impact your credit score negatively.Now, you can learn about the good that comes from store credit cards. As mentioned before, opening a line of credit can help you build your credit score if you are responsible about paying the balance each month. As long as you are very careful about not exceeding your limit or buying more than you can pay in a month, you can absolutely do this to help bump up your credit score.The most important pro for many shoppers is that you have access to some extra promotions and discounts just by using your card. Knowing about the best deals ahead of time can help you shop more efficiently, and it is quite a thrill to get to the checkout counter and see you are paying much less for much more. Discounts are the major attraction to these cards.

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