Everything You Have To Know About Store Credit Cards
Posted by EsmeraldaCathey on July 9th, 2019
With today's fast lifestyles credit cards are important for consumers and retailers because carrying cash or using checks are often more time consuming compared to retail electronic payment technology. Consumers have a lot of choices when it comes to credit cards like standard credit cards, premium credit cards and store credit cards.
There are many reasons why you would take out a store credit card. Whether you are just waiting in line at the shop to find out if you can save on that day?s shopping or the store offers you the promise of saving money in future, these cards will regularly find their way into your wallet (or phones via an app). Almost all big retailers offer their own cards which will allow you to take your purchases home with a very nice discount and without having to part with a penny at the cash counter.
These rewards and discounts are often tempting but can applying for a store credit card come back to bite you? Here is what you need to know about the upsides and downsides of using these cards and also the effect they will have on your credit scores.
Upsides of Store Credit Cards
Special Perks: The main benefit of store cards is that it offers an initial discount of 10% to 20% when you sign up and you may also get extra discounts the entire year if you shop at that retailer. Many store credit cards offer even more such as rewards programs which may feature other special benefits, such as bonus coupons, free shipping, free gift wrapping or free exclusive financing offers.
Easier Qualification: Store credit cards are specifically designed to work for individuals with all levels of credit quality. So if you do not want to apply for a secured card or are unable to qualify for a general-purpose credit card then a store credit card can be a good option. It also allows retailers to escalate their customer reach.
Retailer Discounts: Most retailers promote credit cards as a great way to save money. So, when you sign up for a store credit card you will not only receive an initial 10 -20 percent discount but may also be in line for extra discounts all year long.
Many stores may also offer you 0% interest on financing offers. They will give you twelve or eighteen months interest-free finance to pay off a major purchase with their credit card.
Store credit card holders are also the first to receive special coupons or gain access to exclusive sales events. Everyone loves saving money, but make sure that you do not overindulge and go on a spending spree.
Downsides of store credit cards.
Limited Use: Some retail credit cards may offer the same flexibility as a regular card, but most of them are closed-loop credit cards that are limited to purchases at that particular store or a chain of stores. In addition, these store credit cards may have a low spending limit and can impact your credit score.
Have a High-interest Rate: The biggest negative is that they always have high-interest rates. So, if you plan to carry a balance or have trouble staying within your budget store credit cards is not a responsible choice. According to a survey by CreditCards.com in 2016 the average APR on America's retail-branded credit cards had increased to almost 24 percent, which is far higher than the average for all credit cards (15.18%) The high APRs of typical store credit cards mean that you will have to pay hefty interest charges if you do not pay your balance before the end of the grace period and that would completely negate the 10-15 percent discount that you had received on your initial purchase.
They Encourage Debt: Another negative is the temptation to spend more when you have a retail credit card. Stores frequently offer cardholders? incentives like discounts, emails about sales and also rewards on your spending. Many retailers will continuously raise the credit limit of your card to increase your spending. You should follow the rules of spending only on what you can afford and keep the balance below 30% of the credit limit. If you are not disciplined with your spending you could easily find yourself in debt.
Potential misunderstanding: Generally when you sign up for a store credit card in-store you are not given a full explanation of all the terms and conditions at the point of sale. Typically you will be given a brochure with the credit card terms and you really may not have enough time to examine the costs of the card and compare it with other credit cards and be sure that you are getting a good deal.
How Store Credit Cards Affect Your Credit
People who are looking to establish or rebuild credit history may find a friend in retail store cards. If your credit score needs some polishing a store credit card can help you build credit. It is a great way to build credit as retail store card issuers normally approve people with lower credit scores. However, co-branded store cards are harder to qualify as people with higher credit scores will get lower interest rates.
When you apply for a new credit product like a store credit card, the issuer will perform a hard inquiry on your credit report. This is generally not harmful to your credit as many consumers will see only a temporary credit score hit of about five points. However, if you apply for several store credit cards at once it could be harmful to your credit rating especially if you have a short credit history or few accounts.
Your credit utilization ratio is one of the key factors that influence your credit scores. Store credit cards usually come with a low credit limit of about 0. So by using store credit cards, you can reach a credit utilization ratio of 30% with a purchase of just 0 dollars.
However, if you use your store credit card sparingly, keep a low balance and pay off your bills immediately, the available credit on your store card can drive down your utilization rate and increase your overall credit.
You can establish a credit history by using and paying off the bills on time and also reduce your debt-to-credit limit ratio by using it sparingly and keeping statement balances low. This makes up 30 percent of your credit score. It will also establish a pattern of good habits which in turn will boost your score.
You can benefit from store credit cards if you are responsible and pay your balances each month. Still, you should take time to understand the advantages and drawbacks of store credit cards. You should also check out the other credit cards in the market to find out one with better rewards and lower interest rates.
About the Author:
My name is Jenald Marie Caldwell a Financial Adviser at Zinu Credit Repair. It is a legitimate credit repair agency in US. That offers a free credit repair consultation, which includes a complete review of your FREE credit report summary and score. If you are looking for the best credit repair company in your area. Please contact me.Top Searches - Trending Searches - New Articles - Top Articles - Trending Articles - Featured Articles - Top Members
Copyright © 2019 Uberant.com592,569 total articles and counting.