Should I Use a Store Credit Card?

A man smiles in a store doorway.

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Have you ever walked into your favorite retailer and wondered, "How do store credit cards work?" or "Should I open one just for the sake of getting a discount whenever I shop here?"

Store credit cards are offered with nearly every purchase you make at a store—primarily with department stores—but now you can get them from home improvement stores and chain stores such as Target.

The main selling point of a store credit card is that it offers you an additional percentage off of your purchase price every time you use the store’s credit card.

How Do Store Credit Cards Work?

Store credit cards work similarly to traditional credit cards. You make purchases on the card, which you can pay off over time. Each month you will be required to make a minimum payment. The interest rates on store credit cards tend to be higher than you would have on a traditional card. Many stores will offer discounts if you use the credit card to make a purchase and they may also offer incentives like additional money off on your next purchase.

Many store credit cards are offered by banks through the store. It is important to carefully read the credit card agreement so that you know which bank is handling the card and how to make payments on time. You may be able to apply for a store credit both in the store and online. Be sure to review the interest rates as well as fees and penalties.

What Are the Advantages of Store Credit Cards?

It is important to remember that the store would not offer a discount if it was not to their advantage. According to a survey, the average interest rate on store credit cards was 25.77% in October 2021. If you purchase the item and then do not pay the balance off in its entirety, the store is going to make back the discount and then some over the time it takes you to pay off the card.

A store credit card may be easier to qualify for, which means it may be a good option if you want to build your credit. However, it does mean that you need to do this responsibly. If you want to improve your credit score, be sure to keep the balance low and to make your monthly payments on time. If possible pay off the card in full each month.

What Are the Disadvantages of Store Credit Cards?

If you can be disciplined and pay off the card in its entirety every month, then it may work to your advantage. Some people will make the charges on the card and then go straight to the customer service desk to pay off the balance in full. This option only works if you are extremely self-disciplined. If you are not, then you should not run the risk of falling into the credit card trap.

Another disadvantage of using the credit card is that people spend more money when things are on sale or when they are getting a discount for putting the purchase on a credit card. If you have a strict budget of $100.00 per month for clothing, and you put it on the credit card and end up spending $130.00 to save on the discount, you still overspend the amount that you had set aside. Since you are putting it on a card instead of paying cash for it, it is easier to let yourself overspend consistently, which will drive up your balance.

It is important to remember that a credit card is a tool, and if you do not use it correctly, you may lose all of the advantages of having one. The percentage you save or the rewards you earn are not worth the interest you are paying if you do not pay off your credit cards quickly. Refrain from using the card if you know you will not be able to pay it off soon.

Avoid Using Store Credit Cards

It is safer to avoid the trap and temptation of store credit cards and stick to paying cash for all of your purchases. If you need to save money, shop the sales, and use coupons when you can. If you are careful about the way you spend and what you buy, you will be better off than running the risk of running up your card. If you currently have store credit cards, you should stop using them and begin working on paying your balance down as quickly as possible.

Store credit cards should be treated the same as any other credit card. If you are carrying a balance on any of your credit cards, you should set up a debt payment plan. A budget is another important tool to help you get control of your finances. If you are sticking to your budget and paying off the store card in full each month, you will reap the benefits offered. If you cannot pay off the card or you are overspending in budget categories because of the card, you should steer clear of using the card completely.

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  1. "Retail Store Card APRs Hold Steady Despite Fed Rate Cuts."

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