Should You Sign Up For A Store Credit Card?

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Walk into any major retailer these days and chances are it has its own credit card. Staff are probably roaming the aisles, telling you the benefits of the card. Or at the very least, they’ll prompt you to apply for it when you’re at the check-out.

Applying for any credit card is an important financial decision. You need to consider the benefits and find out the details before you go ahead and add another credit card to your collection.

What’s the signup bonus?

The main reason people sign up for a store credit card is for the immediate bonus offered. A standard sign-up bonus might be 10% to 20% off your entire purchase, just for applying. If you spend only $100, that’s a $10 to $20 return, which isn’t worth your trouble. However, if you spend $1,000 then you have a potential savings of $100 to $200, which may be worth considering.

Is the rewards program any good?

The type of rewards the store offers is just as important as the sign-up bonus. You want to figure out what the earned rewards points are worth from a dollar perspective. It doesn’t make sense to apply for a store credit card that only returns 1%. You’re much better off using a cash back card where you have a higher earning potential.

Retailers will usually offer extra rewards points but only when you shop at one of their branded stores. You could use this to your advantage by using the credit card that offers you the best return when making purchases at specific retailers. Be sure however to compare the price you have to pay for the merchandise with what you can pay elsewhere, along with any rewards value.

Are there any additional benefits?

Generally speaking, it’s hard for in-store credit cards to compete with other credit card benefits so they need to offer you something that will make you want to use their card. Look for additional benefits such as extended return policies, free shipping, and exclusive savings events or coupons. Remember, these additional benefits are meaningless, if you don’t take advantage of them.

Can a store card help you build credit?

Store cards can often be easier to qualify for if you have poor credit. This is part of the reason why they charge higher interest rates than traditional cards. If you qualify, and use these cards wisely, they can be a way to begin to build or rebuild your credit.

What are the associated fees?

Store credit cards almost never have a yearly fee, but you do want to look into the interest rates. The typical credit card will have an interest rate of around 19.9% but store credit cards are usually closer to 29.9%. That’s a huge difference. And if you’re constantly carrying a balance on your card, it makes more sense to apply for a low interest credit card card as opposed to a store credit card. No amount of rewards are worth it, if you’re paying interest.

Other fees to look out for include cash advances, balance transfers, and balance protection. All of these features are optional but are rarely worth the price, so be sure to avoid them.

Do you even shop at that store?

If you don’t shop at that store on a regular basis, why collect points? As mentioned, the one-time sign up bonus might be worth your while, but you’re better off selecting a rewards credit card that better suits your day-to-day spending. Also, be mindful of the merchant. What good is 10% off if it charges 15% more compared to other retailers?

In-store vs branded card

If the card is just a branded card and can be used elsewhere that may extend the value of getting a new card. Compare the rates, fees and benefits of switching from your current card.

Be careful about spending

Certain retailers will give you a promotional discount if you use their card on specific days or weekends. Over time, you may be tempted to make unnecessary purchases. If you tend to carry a balance, you’ll end up going deeper into debt and paying a higher rate of interest than a regular credit card.

The bottom line

Before deciding whether or not to get a store credit card, think about the pros and cons of getting one. If you spend responsibly and pay your balance off in full and on time, a store credit card might be right for you. But if you tend to spend money because you can’t miss a deal and have trouble paying off your balance, you’ll want to think twice before signing up for a store credit card.

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