Pros and Cons of Store Credit Cards

Posted by Nick Niesen on October 29th, 2010

In 1958, a department store chain based in small suburb of Dallas, Texas issued a credit card that afforded users a great discount on products bought from their stores using the card. Ever since J.C. Penney started that trend, many other department store chains have followed suit, realizing the potential profits of this.

With discounts of up to 15%, store credit cards can be hard to resist. This can especially be true during holiday seasons such as Christmas when discounts can mean a whole lot of savings due to high volume of purchases. However, as with most credit cards, you?ve got to read the fine print and weigh the pros and cons before you jump on the bandwagon and get a store credit card for yourself.

Cons of getting store credit cards

The greatest drawback of store credit cards would be their exorbitant APRs. These can reach as high as the upper teens. For some people, that simply isn?t worth it. If you tend to miss paying off your card balances each month, then you should forget about store credit cards.

Another disadvantage would be the effect of the open lines of credit on your credit score. With all the alluring discounts, it?s easy to get carried away with your spending and end up with a pile of debt.

Pros of getting store credit cards

Unlike regular credit cards, store credit cards are much easier to sign up for. This can make store credit cards useful in establishing a good credit history. The lower spending limits also mean that you are far less likely to get carried away with your spending.

With department store cards, you can sometimes obtain a financing option for larger purchases such as appliances, furniture or electronics. Some stores offer their customers the option to pay for such purchases through a 6-12 month installment plan with little or no interest. However, the catch here is default payments may result in a longer repayment period where interest charges become applicable after this period.

Just like their regular counterparts, store issued credit cards come with all sorts of reward programs that you can take advantage of. In addition to these, most stores have a ?special savings? event whereby greater discounts are offered during certain periods exclusively for cardholders.