It happens almost every time you shop at a big box retailer, department store, or online shop. A cashier or pop-up advertisement will ask whether you’d like to save money on your purchase, qualify for special financing promotional offers, or gain access to exclusive shopping events. What’s the catch? You need to sign up for the store’s credit card.
Store credit cards can offer outstanding deals that can stretch your shopping dollars further than you thought possible. They can also be incredibly bad deals for a consumer who spends impulsively. If you’re questioning whether now is the time to snatch up a great promotional offer, here are some things to consider before signing on the dotted line of your favorite store’s credit card application form.
What Are Store Credit Cards?
They are ordinary credit cards! Store credit cards are also called retail credit cards and are offered by a bank that works with a retail chain. The cards can be used like ordinary credit cards to finance ordinary purchases. Spending at the store, a gas station, or anywhere else will help you rack up reward points, cash back deals, and give you access to other financing incentives. Just how common are store credit cards? According to one of the biggest credit industry groups in America, a typical credit card holder has 1.55 active store cards.
Retail credit cards encourage you to keep coming back to your favorite stores for regular purchases, and that is a major reason why some of America’s biggest outlets promote them so heavily. Whether you’re a regular at Costco, Amazon, Macy’s, Best Buy, Big Lots, J. Crew, or any number of other outlets, you’ll be able to find a retail credit card that fits your needs, gets you access to exclusive shopping events, and entitles you to immediate discounts.
What Are the Pros and Cons of Store Credit Cards?
Retail credit cards can be a great way to build your credit score and save money if you use them wisely. The cards impact your credit score in much the same way that unbranded credit cards do. You will see your credit dip slightly when you apply for them and the card will promote a higher score over time as the account grows in age, is paid off with regularity, and your credit limit is increased.
Some retail cards are offered on very generous terms to people with limited credit histories. Walmart’s credit card is a great example of an easily awarded card that carries hefty benefits. It not only gives users cash back on certain purchases, it also allows cardholders to pull up to $100 a day out of the account as a purchase instead of an expensive cash advance. If you find yourself wanting to boost your score to support a mortgage application, a retail store card may make sense.
The advantages of particular cards vary from outlet to outlet. Amazon’s rewards card offers bonus cash back on all Amazon purchases. They even waive foreign currency transaction fees and give Prime members extra spiffs. Macy’s gives additional cash back promotions to cardholders, waives shipping fees for online purchases, and offers cardholders 25% off coupons that can be used throughout the year. These promotional offers are far from unique. If you’re interested in applying for credit cards, be sure to consider a store card that meets your needs and gives you some well deserved savings.
The biggest downside to store cards is that they can encourage impulsive spending and typically come with fine print that transforms a great deal into an expensive lesson. A 25% off coupon is a great deal if it saves you money on a purchase you were going to make regardless of the coupon. It’s less of a deal if it encourages you to spend money you did not budget on something you do not really need.
Store cards typically offer same-as-cash financing deals. Under the terms of these promotional offers, stores will allow you to pay off a big purchase over several months without any interest charges. These deals are great as long as you pay the entire balance off within the same-as-cash promotional window. If you don’t, you’ll typically be hit with finance charges dating back to the date of purchase. This can be hundreds of dollars of unplanned fees if you made a major purchase.
What’s the Verdict?
Retail credit cards can be a great deal if you are responsible with your credit usage, only buy things you’ve budgeted for, and promptly pay off your bill every month. Gaining access to steep discounts, free shipping deals, and other promotional offerings can make buying gifts and necessities a bit cheaper and that can be a great advantage around the holiday season.
However, if you aren’t that responsible, you could land yourself an expensive bill with a high APR.