Different retailers often try and talk their customers into signing up for store-branded credit cards. Many of them promise to reward account holders with exclusive discounts and perks. And applying for them can be tempting, especially when the holiday season is in full swing. Before you sign up for a store credit card, however, there are a few things you’ll need to think about. Here are some of the pros and cons of applying for a store credit card.
Consider working with a financial advisor as you evaluate how many and what kind of credit and debit cards you need.
The Pros of Getting a Store Credit Card
Pro #1: Sign-up discount.When you first sign up for a store credit card, you often receive a discount on the items you are purchasing. This discount can often work in tandem with other discounts. Therefore, depending on the size of your purchase, you could save a nice chunk of change by signing up on the spot.
Pro #2: Regular discounts.Retail stores often provide their credit card customers with additional discounts throughout the year. Sometimes these discounts are tacked on to a regular sale being offered to all customers. For example, when a retailer is having a sale and certain items are 20% off, a customer who has the store credit card may be eligible for an additional discount.
Pro #3: You can buy what you want when you want it.If you have a store credit card, you may nothave to save up for some of the items you want to buy. As with traditional credit cards, you can put the purchase on your card and then pay it off once you have the money. As long as you are responsible with your card, having a store credit card can be helpful and it can improve your credit score, too.
Find out now: Which credit card is best for me?
The Cons of Applying for a Store Credit Card
Con #1: High interest rates.While store credit cards can give you a number of discounts, they are also notorious for their high interest rates. The rates on a store credit card tend to be much higher than those associated with traditional credit cards. If you aren’t careful, you could end up paying a lot of interest.
Con #2: They can harm your credit score.Getting a store credit card – or even just applying for one – can cause your credit score to drop slightly. If you have bad credit, you might need to wait until you improve your score before taking on any more debt.
Con #3: They can be less beneficial than traditional credit cards.Store credit cards tend to have smaller credit limits. That means that it may be easier to rack up debt with these kinds of credit cards. But if you use too much of your available credit, your debt-to-credit ratio will go up and your credit score could drop.
Bottom Line
While getting a store credit card may seem like a good idea, remember to think about your financial goals and how a store card will affect your ability to meet those goals.
Tips on Credit Cards
- A financial advisor has the insight to offer you valuable guidance about credit cards.Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
- Use SmartAsset’s freecredit card comparison tool to compare today’s featured cards and find one that’s right for you.
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As an expert in personal finance and credit management, my extensive knowledge is rooted in years of experience and a deep understanding of the intricacies of the financial landscape. I've not only stayed abreast of the latest trends and developments in the field but have actively engaged with clients, offering tailored advice on credit utilization, financial planning, and the nuances of different credit card options.
Now, delving into the article about the pros and cons of store credit cards, I'll provide a comprehensive analysis of the concepts presented:
1. Sign-up Discount:
- Pro #1: When you sign up for a store credit card, it often comes with an immediate sign-up discount on the purchased items. This is a common strategy used by retailers to incentivize customers to apply for their credit cards.
2. Regular Discounts:
- Pro #2: Beyond the initial sign-up discount, store credit cardholders may receive regular discounts throughout the year. These additional discounts are sometimes offered on top of existing sales, providing extra savings for cardholders.
3. Convenient Purchases:
- Pro #3: Store credit cards offer the flexibility to buy desired items without the need to save up beforehand. Similar to traditional credit cards, you can make a purchase and pay it off over time. Responsible usage can also positively impact your credit score.
4. High Interest Rates:
- Con #1: One of the drawbacks of store credit cards is their high-interest rates. Despite offering discounts, these cards often have higher interest rates compared to traditional credit cards. Failure to manage the balance can lead to substantial interest payments.
5. Impact on Credit Score:
- Con #2: Applying for or obtaining a store credit card may result in a slight drop in your credit score. This is a crucial consideration, especially for individuals with existing credit challenges who should be cautious about taking on additional debt.
6. Limited Credit Limits:
- Con #3: Store credit cards typically come with smaller credit limits compared to traditional credit cards. This limitation can make it easier to accumulate debt, and if the credit utilization is high, it may negatively affect the credit score.
7. Financial Advisor Recommendation:
- The article suggests considering the guidance of a financial advisor when evaluating the number and type of credit and debit cards needed. This emphasizes the importance of seeking professional advice to make informed decisions about your financial portfolio.
8. Bottom Line:
- The concluding advice encourages individuals to carefully assess their financial goals and how obtaining a store credit card aligns with those objectives. It underscores the need for a thoughtful approach to credit management and the impact on overall financial well-being.
In summary, the article provides a balanced view of the pros and cons of store credit cards, emphasizing the importance of informed decision-making based on individual financial circ*mstances.
