How to Use Store Credit Cards

Jun 24, 2014 by Askia Roberts

Many of us have and use store credit cards. We’re commonly enticed to complete store credit applications by promises of discounts and rebates. But are these store credit cards a smart decision? It isn’t easy to know. A little self-evaluation is likely to yield the best answer.

Stores issue credit cards in hopes that you’ll shop in their stores more frequently. They’re also betting that you won’t pay your full balance each month. Companies that issue credit cards make a lot of money from interest payments and late fees. Be cautious and avoid falling into those common traps.

Store credit cards can be useful, if they’re used correctly. The savings can be great, but the interest rates are high. The value of store credit cards is largely dependent on using them responsibly and intelligently.

As with anything, there are advantages and disadvantages to using these cards:

Credit. An additional line of credit can be useful. It’s another opportunity to build your credit history and boost your credit score. It’s important to use credit wisely. Another line of credit is also another opportunity to create additional debt and financial headaches. 

• The greater your total credit limit, the greater the potential for financial disaster.
  

2. Discounts. Holders of store credit cards frequently receive discount offers. It’s also common to receive coupons in the mail. The savings can accumulate over time and add up to a considerable amount. 

• It’s important to take advantage of discounts and coupons offered through store credit cards rather than essentially giving them back by carrying a balance on your account.
  

3. Rewards. Many store credit cards also have perks. These might be in the form of rewards points that can be redeemed in some fashion. Similar to traditional credit cards, free merchandise or gift cards are the norm. It’s also possible to receive other perks, like free gift wrapping.
4. Interest charges. Of course, if you pay your balance in-full each month, the interest is irrelevant. Credit card companies know that most consumers will eventually carry a balance and return those discounts back in the form of interest payments. 

• Store credit cards have some of the highest interest rates out there.

5. Limited use. Using store credit cards is limiting because you can only use them in the store that issued the card.

Store credit cards can potentially be a valuable financial tool because there are significant savings to be had. However, be responsible with these cards. Store cards typically have low credit limits and high interest rates. The limited acceptance can limit the overall utility.

Consider how much money you’ll actually be saving over the course of a year. Additionally, judge your ability to pay your balance each month. The answer will tell you if a store card will enhance or challenge your financial situation. It’s these little decisions that can have a great impact on your financial well-being.

A traditional credit card may be a better option. Even if you’re unable to receive the same discounts, you might be eligible for additional perks, such as airline miles or gift cards. More importantly, it’s possible for most consumers to find a credit card with a much lower interest rate and a higher credit limit.

If you have weak credit, a store card can be easier to obtain than many traditional cards. If you have the necessary funds, a secured credit card is another viable option. Ultimately, only you can determine if a store credit card is right for you.