Retailers frequently try and talk their consumers into signing up for department store credit cards. A lot of them promise to reward account holders with exclusive perks and discounts. Applying for them can be attractive, particularly when the holiday season is in full swing.
Before you sign up for a store credit card, there are a few things you’ll need to think about. Here are some of the pros and cons of applying for a credit card from a store.
The Pros of Getting a Store Credit Card
Exclusive Discounts and Freebies
When you first sign up for a store credit card, you actually receive a discount on the items you are buying. You can’t beat some of the freebies and perks you obtain for opening a new card, particularly if you meet the criteria for an immediate discount. Several store cards assist you to earn gift cards and reward points depending on how much you spend, and you may have access to exclusive cardholder freebies and discounts.
Department stores frequently offer their credit card customers with extra discounts throughout the year. Occasionally these discounts are tacked on to a usual sale being offered to all customers. For instance, when a seller is having a sale and definite items are 20% off, a customer who has the store credit card may be qualified for an extra discount.
You can purchase what you want when you need it
If you have a department store credit card, you might not have to save up for some of the items you want to purchase. As with traditional credit cards, you may put the consumption on your card and then pay it off once you have the money on your credit card. As long as you are responsible with your card, getting a department store credit card may be helpful and it can enhance your credit score, too.
Helps Build Credit
Store credit cards provide revolving lines of credit, so it can assist you to develop your credit history and rebuild bad credit if you utilize your credit card responsibly and don’t get in over your head. You could apply for department store cards for bad credit to repair your credit history as long as you keep those accounts in good standing.
Interest-free financing is offered by many sellers for a new cardholder, which allows larger purchases more budget-friendly if you settle off the outstanding during the promotional period. Several stores provide financing plans with no interest on outstanding settled in full within six, 12, 18 or 24 months. Plus, you can still get cardholder freebies and discounts.
Easier to Get Approved
A store credit card could be your best alternative if you have bad credit. Several department store cards have simple credit requirements than usual cards do, so you have a better opportunity of getting approved.
The Cons of Applying for a Store Credit Card
Hard Inquiry on Your Credit Report
The business runs a credit check when you apply for a store credit card which indicates the credit bureaus will be informed that you are requesting to open a new credit line. This is referred to as a “hard inquiry,” and it will be included in your credit report. The typical customer loses up to five points off his FICO score only for submitting that application. If you previously have a low credit score, applying for a new credit card may not be a wise financial move.
Might Lower Your Credit Score
Applying for and utilizing a store credit card might work against you. Your credit utilization ratio is calculated by Credit bureaus which is the total credit you have available compared to your total debt, to establish your creditworthiness. Utilizing a high percentage of your available credit will affect this ratio and might lower your credit score.
Costly Late Payment Fees
When you open a new store credit card account, it’s all too easy to miss that first payment due date. Losing track of your billing cycle could result in a late fee, and you might lose any promotional rates offered when you got the card.
Department store credit cards charge some of the highest interest rates. Owing a large balance for an extended period might result in you paying a much higher price for those purchases even if you purchase them on sale. Cardholders who don’t pay their total balance each month usually end up paying an extra percentage of the interest charges. Therefore, be conscious of the interest rates on your store cards, and pay the balances every month to stay away from paying excessive interest.
They can be less beneficial than traditional credit cards
Department store credit cards normally have smaller credit limits. That indicates that it may be easier to rack up debt with these types of credit cards. But if you utilize too much of your available credit, your debt-to-credit ratio will go up and your credit score could drop.
In conclusion, while getting a store credit card may seem like a good idea and it is very easy to apply for a credit card online these days, remember to think about your financial objectives and how a store card will affect your capacity to meet those objectives because department store credit cards can assist with building credit and financing huge purchases without busting your budget. As long as you pay on time and pay more than the minimum payment every month, you won’t be doing much financial damage. But these cards aren’t without disadvantages, so savvy shoppers need to take a closer look at all the department store credit card pros and store credit card cons before applying for a credit card.