The Benveniste Law Offices | Pros and Cons of Store Credit Cards

One of the most common ways people end up with more credit cards is through in-store promotions. Sales associates often ask customers if they want to save 15 or 20 percent on their purchase that day by offering the discount for a credit card application. When the shopper answers with a “yes,” the application runs a credit background check to determine whether the individual meets the requirements for the card.

These offers are frequently tempting; however, just because they exist doesn’t mean shoppers will benefit from taking advantage of them. If the individual doesn’t shop frequently at the particular store or already has a few credit cards, he or she may want to avoid signing up. It’s important to know the pros and cons of having store credit cards before making the decision to accept promotional credit card offers in-store.

Advantages of Store Credit Cards

A store credit card can help a person establish and build credit. Some people don’t initially qualify for a regular credit card, so they opt for a store card instead, which is easier to acquire despite poor or no credit. This is an ideal option for people who need their first credit card.

Some store cards are co-branded. In other words, they are not just store cards, they also double as a MasterCard or Visa. Co-branded cards are more difficult to acquire because there is more risk in using them. If a person with a higher credit score applies and qualifies for a co-branded credit card, he or she will likely get a lower interest rate. Additionally, keeping a low balance on store cards can help boost a person’s score, especially if he or she uses it wisely and stays within a healthy credit utilization ratio.

Another perk of store credit cards is that they offer rewards. A card that is co-branded may even have a base earnings rate, allowing the user to earn points from using it anywhere. Co-branded cards can be extremely versatile as they allow you to shop wherever the co-brand (Mastercard or Visa, for example) is accepted.

Disadvantages of Store Credit Cards

One of the worst aspects of store credit cards is that they tend to carry high annual percentage rates, which can make debts considerably higher. On average, the APR of a store credit card is around 24.99 percent, which is higher than the national average for credit cards.

Store credit cards can also potentially hurt one’s credit score. For instance, if a person’s credit limit on a store card is $300 and he or she spends $200, the credit utilization is far higher than what it should be. This decrease in capacity can cause a credit score to dip. Initially, many store credit cards offer restricted spending limits, which prevents you from using it much while keeping a low credit utilization ratio. Additionally, when a person applies for a store credit card, a hard inquiry is made on his or her credit.

Too many hard inquiries in a short period of time can adversely affect a credit score. When considering applying for a store card, think back to the last time you applied for any type of credit. It may not affect your credit score much if enough time has passed.

Overall, having one or two store credit cards that are used at least semi-regularly is generally acceptable. It’s wise to do your homework before signing up for a card, and you should only aim to get one from a store you frequent. Doing your research can help you avoid hefty credit card debt and a falling credit score.

Just one forgotten store credit card balance can prompt a stream of debt issues. If you are in debt because of store credit cards, you may be wondering how can I close my store credit accounts or how can I manage my store credit card debt? Fortunately, Heather Benveniste of Benveniste Law Offices can help you strike a deal. With seven years of experience working for debt collectors, she can put her experience to work to negotiate a fair debt settlement agreement. Contact us today for a free case evaluation or call 1-800-497-5358 to discuss your debt.