Store Credit Cards

It’s a classic hectic January shopping moment: you’re at the checkout, about to drop a pile on some last-minute deals, and the cashier asks if you’d like to sign up for the store’s credit card.

The application process won’t take but a minute and better still you can get an even better deal on your purchase. Maybe a percentage discount or a don’t-pay-for-x-number of days thing.

Why not? Because there are some serious problems with store credit cards. They offer a sneaky way to reduce your credit rating, get yourself into debt and entice you to shop more.

Are store credit cards a good idea? Let’s review the pros and cons:

Why Store Credit Cards are a Good Idea – The Pros

• The incentives - Everything from ‘don’t pay for a year’, to massive discounts, to cash and gifts rewards
• Store credit is relatively easy to get and it’s fast
• If it’s a store you visit often, the rewards may be worth it

Why Store Credit Cards are a Bad Idea – the Cons

• The interest rates are crazy high. If you thought 19.99% interest was high on your normal rewards card, how about the typical 29.99% interest charged on store credit cards? Yikes!
• If you’re late on your payments the interest can add up very quickly and there have been complaints about stores not waving charges for customers that have missed payments by a day or two
• Store staff are typically incentivized to get customers to sign up by the credit card issuer, so they can be a bit pushy sometimes.
• Store credit card issuers do NOT need to adhere to the new credit card regulations recently introduced by the Department of Finance that are designed to improve transparency in the industry and make it easier for consumers to understand their statements and what they’re being charged.
• Applying for several of these cards in a relatively short period of time can negatively affect your credit score, even if you pay off the balance in full before the due date

Making store credit cards work for you

So, how to make the most out of those store credit cards?

• Only sign on for a card for a company you truly use. Gas cards, home reno store cards if you are doing a lot of fixing up, come to mind. Get one of these cards, two max, and leave it at that.
• Know the points and rewards systems on the few cards you have and truly take advantage of them. If there’s a cardholders discount day, hold off on purchases until that day. Keep track of and redeem your points.
• Read your bill statements every month and make sure your credit limit is low, your interest rate is being fairy charged and you’re not falling prey to any find print you missed reading when you got the card.
• Fully pay off these cards each and every month. If you can’t do that, get rid of the card or consolidate your debt with a loan or line of credit.