Should you get a store credit card?

It seems like an easy way to get an extra 10 percent to 15 percent off your purchase, but will applying for that store credit card come back to bite you?

By MSN Money Partner Dec 11, 2013 1:34PM

This post comes from Maryalene LaPonsie at partner site Money Talks News.

Money Talks News on MSN MoneyAt checkout registers in department stores across the country, you can expect to receive a smile and a sales pitch. Well, at least a sales pitch.

Store credit cards are moneymakers for businesses, and you can expect clerks to dangle a nice discount in front of you in the hope you'll apply.


Many of us seem to be taking the bait, with credit bureau Equifax reporting the number of retail-issued cards at a four-year high. During the first half of 2013, more than $46 billion in new credit was issued on store-branded cards.

The discount may be tempting, but are store credit cards a good deal?

Pros of store credit cards

Store credit cards aren't all bad. In fact, they can come with some nice benefits. As we see it, there are four major pros for getting a store credit card.

  • Discounts. Not only do you get an initial 10 percent to 20 percent discount when you sign up, you may also be in line to receive extra discounts all year long. Store credit card holders may be the first to receive special coupons or gain access to exclusive sales events as a reward for their loyalty.
  • Flexibility. Some, but not all, store credit cards are affiliated with one of the major credit card companies. That means your department store card can also be used for purchases elsewhere as a regular Visa, MasterCard or American Express card. As a bonus, depending on the retailer's program, you may even earn rewards points to be redeemed as future discounts at the store.
  • Credit benefits. If your credit score could use some polishing, a store credit card may be able to help. Consistently using and paying off the card will help establish a pattern of good credit habits that can, in turn, boost your score.
  • Financing options. Finally, some store credit cards can be used to obtain 0% financing offers. Stores may give you 18 months or more interest-free to pay off a major purchase made with their credit card. of store credit cards

While there are definitely some nice perks attached to store credit cards, all is not rosy. Here's a look at some of the negatives attached to these accounts.

  • High interest. By far, the biggest negative associated with store credit cards is their interest rate. Some have APRs climbing to almost 30 percent. And remember that 0 percent financing we discussed? If you don't pay off your purchase within the allotted time, many store cards go back and apply the interest retroactively. So let’s say you had 18 months to pay off a $2,000 purchase, but you still had a $200 balance at the end of the financing period. The store will then tack on 18 months' worth of interest to your balance. Yikes!
  • Limited use. Some store cards may offer the same flexibility as a regular credit card, but others can only be used at that particular retailer. In addition, you may have a very low spending limit. Both make it questionable whether the cards are a good deal, particularly when you consider the ding to your credit score that we're going to talk about next.
  • Credit damage. Your credit score gets dinged slightly every time you have it pulled for a card application, and your score will also suffer if your card balances are too high. The damage can be felt in other ways. When reviewing loan applications, creditors not only consider how much debt you have but also how much existing credit is available to you. If you already have enough credit to go on a $20,000 spending bender, lenders might be hesitant to give you access to more cash.
  • Temptation to spend. Another negative we see with store cards is the temptation to buy more. Stores aren't giving out cards and coupons to be nice; it's a strategic business decision. They hope that by giving you a few perks, you'll come to their store and blow your budget once you see all the great things they have for sale.
  • Better deals elsewhere. There are credit cards offering signup bonuses good for a free plane ticket, a reward that could be a better deal than 15 percent off one day's purchases. So when you're offering up your signature, be sure you're getting as much for it as possible.

The bottom line

So back to the original question: Should you apply for a store credit card? In the past, we've told you the answer is no.

However, if you have a store you shop regularly and a card gets you an extra discount, it may make sense. But be sure you follow these two rules:

  1. Buy only what you would purchase even if you didn't have the card. No extra trips just because there is a "cardmember only" sale.
  2. Pay off your balance each month.

Still, you might want to check out the other credit cards on the market to see if you can find one that offers better rewards with a lower interest rate.

Do you have a store credit card? What made you apply and do you regret the decision?

More on Money Talks News:

Tags: Retail
Dec 19, 2013 3:55PM
For the last 2 decades my decisions have been based on what we have.  If I can't pay cash for it, I won't buy it.  My spouse hates it, but at least we've never been in debt.  If that means buying a used car, rather than a new one, so be it.
Dec 19, 2013 2:43PM
I always say NO to these offers.  This is how my identity was stolen.  Never again!
Jan 2, 2014 10:01PM
Almost nothing can be answered yes or no 100% of the time; but store credit cards and/or loyalty programs are generally bad.  A local chain grocery with its own gas stations recently offered those with a loyalty card a 50 cent per gallon discount for up to 20 gallons of gas if they spent over $100.00 on groceries.  The price of their gas increased 55 cents a gallon two days before the discount promotion.  A king size Hersey bar at this store is $1.59, at other area stores it is, at most, $1.37.  With their 10% loyalty discount you are still paying 6 cents more per bar.  Same is true throughout the store.  One or two items that people generally buy in limited quantities will have a real discount. Most of the rest are inflated rather than discounted.  And, of course, your privacy is totally invaded.  If it can happen to target, it can certainly happen to other smaller chains with less money invested in your privacy.  Boycott em  all.
Jan 3, 2014 3:22AM
Don't buy groceries with your store credit card.  Before long, the bill got out of site, high interest on food you already eaten.  Bad, Bad, Bad.
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