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Are Store Credit Cards the Best Bet for You?

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Advance Personal Finance

Advance Personal Finance

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Store clerks always ask when you’re in a rush to check out, “Would you like to save an additional 10% on your purchases today, by applying for a store credit card?” The extra discount seems tempting, but you know there’s a catch…or is there? Always have time to consider the pros and cons of store credit cards. You’ll see that there are many benefits to store credit cards that you may have overlooked.

Store credit cards help you build your credit score

The main reason to get a store credit card, also known as a retail credit card, is to raise your credit score and rating. For one thing, it’s easier to get approved for a store credit card than a standard credit card. The reason is banks offer special deals to retailers. You don’t need a 700+ credit score to get approved for a store credit card, as you would for a bank-issued card. Retail credit cards are available to consumers with scores as low as 550 at some stores.

When you get approved for a store credit card, it increases your credit limit automatically. This lowers your “utilization ratio,” which says you’re staying within your credit means. This makes you less of a risk to borrowers. However, this only helps your credit situation if you use the new card sparingly. Meaning once a month or less.

Be careful how you use store credit cards

Use your store credit card wisely, and it will help you improve your credit score; use it impulsively, and it can worsen your rating. As a rule, store credit cards have higher interest rates than conventional credit cards, so using them frivolously will hurt your credit score and history, and send you into a debt cycle. Once you have a store credit card in your hand, retailers will try to entice you to use it by offering promotional discounts or reward points – but don’t fall for them.

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