Have you ever been shopping at a retail store and as you’re cashing out the sales associate asks, “Would you like to sign up for a store credit card and save on your purchase?” If you’re like the majority of shoppers, you kindly decline as you go about your business. If you are someone looking to improve your credit score, you may want to reconsider.
When one mentions the idea of building credit, many people see that as just maintaining a low balance on their existing accounts. While this does reflect positively on your credit report, it is not enough to improve your credit score. To achieve the latter, you must have multiple lines of credit in good standing with low utilization rates. Simply having one or two lines of credit is not going to cut it. This is where store credit cards come into the equation.
These cards are similar to any bank credit card you may apply for; the only difference is that you can only use it in that specific store. There are even vehicle maintenance shops that have credit options available for consumers who may not be able to afford necessary modifications. Although store cards may seem like an unnecessary temptation to spend more money at an establishment, there is a way you can use them to your advantage.
Benefits of Opening a Store Credit Card
One of the most significant benefits of opening a store credit card is that they often have high approval rates, unlike many bank credit cards. While it is true that these lines of credit usually have dramatically high interest rates, those only affect you if you maintain a balance. Here is how you make a store credit card work for you:
Avoid Excess Spending
Knowing that you can purchase virtually anything you please in the store and not have to experience any immediate financial strain is a temptation many cannot avoid. By doing so, you fall right into the trap and find yourself paying interest rates that can reach as high as 27%. Avoid excess spending by only carrying the card with you when needed.
Pay off the Balance Monthly
Paying off monthly balances is the ideal way to manage any line of credit, but it is much more attainable with a store credit card. If you are sticking to regular spending habits and only making purchases on occasion, it should be simple to return your account balance to zero on a monthly basis.
Keep the Account Open
If you keep your account in good standing by abiding by the aforementioned guidelines, you should leave that line of credit open even if you no longer shop at that store. The reason being is that it can lower your credit utilization rate. If your credit limit on your store card is $1500 and you keep that balance at zero, it decreases your credit utilization rate as that limit is added to your overall limit for all credit accounts. Ideally, the more open accounts you have and the further away you are from the limit, the higher your credit score.
If your credit card debt has reached the point that creditors are pursuing legal action against you, be sure to acquire the services of an Illinois credit card debt settlement attorney. Heather Benveniste with Benveniste Law Offices can serve as your legal representation against aggressive creditors and lenders. With seven years experience as a debt collection attorney, Heather Benveniste understands their collection tactics, and can use her knowledge to help you! Contact us today for a free case evaluation.