Store cards seem like a great deal. Typically, you get a big discount on your first purchase — even up to 30% off, which is a big savings if you’re buying something pricey, like a kitchen appliance or a new flat-screen TV. But before you sign on the dotted line, there are some drawbacks to store credit cards that you should be aware of. Here are a few pros and cons to consider.
Pros:
Coupons, special offers and discounts
Helps establish positive credit history if used wisely
Most applicants can be approved
Cons:
High APR and high fees
Damages credit score if not used wisely
Makes it easier to build up debt
Higher APRs
Most retail store credit cards have higher interest rates than general-purpose cards. According to CreditCards.com, the average retail card APR is 24.35%, while the average non-retail card APR is 19.92%. Although a store-branded Visa or Mastercard often has a lower APR than a store-only card, their rates are still typically higher than non-retail credit cards.
Impact on Your Credit Score
In addition, each time you apply for any type of credit — store credit cards included — there will be a hard inquiry against your credit score. Too many hard inquiries can lower your credit score, which can have a big impact on your overall finances.
However, if you don’t have much of a credit history, it can be easier to get approved for a store card than a general-purpose credit card. So, if you spend carefully, stay well within your credit limit and pay your bill in full each month, a store card can help you build a positive credit history and may even raise your credit score.
Good or Bad? It Depends
If you choose to apply for a store card, the benefit or damage comes down to how you use the card and how quickly you pay it off. It pays to think carefully about how you can take advantage of the benefits without having a negative impact on your overall finances.
If your debts become overwhelming, we can help. We offer several debt consolidation solutions that can help you pay your debt off faster. You can also stop by one of our branches or give us a call at 904-777-6000 or 800-445-6289 to make an appointment with a Money Makeover coach and find out how we can help you repair your credit.