At some point, everyone has been confronted by a cashier during checkout at either a big box store, department store or grocery store and asked about signing up for a sore credit card. The rapidly delivered rehearsed speech can leave customers feeling pressured into making quick decisions, as other customers line up behind. Add to that the appealing benefits promised within the sales pitch, and store cards quickly find themselves into customers’ wallets without much thought.
But, are those cards actually doing you any good or saving you money, or are they simply another way to damage your credit if misused?
What Are Store Cards And How Are They Different From Regular Credit Cards?
Store credit cards are similar to typical credit cards in that they are unsecured lines, meaning, the revolving line of credit is not backed by collateral. They come with all the fees, terms and rates you would expect from a traditional card, but their key difference is that unlike credit cards you can use at any retailer, store cards are connected to a specific retailer or chain of retailers.
Additionally, store credit cards usually come with extra incentives, including cash back for purchases, points rewards, increased discounts or exclusive benefits.
However, store cards also come with a downside, as most have higher interest rates and stringent pay schedules attached to late payment fees. Furthermore, the credit limit on store cards are typically small as well, so it is easy to exceed the ideal 30% usage rate.
Do you know what the 30% Rule is? Quizzle can give you the scoop.
Considering The Store Card
In order to know if a store credit card is an appropriate option for you, you must first take a long hard look at your credit.
Katie Bushor, director of client relations at Quizzle explained, “Take note of not only what is on your report, but what is says about your financial habits. Scrutinize over past tendencies. Do you pay on time, every time? Do you pay more than the minimum amount on all your accounts? How many lines of credit do you have, how are you handling them and how are they performing?”
Your credit report functions as a snapshot into your financial portrait, with each piece of the report indicating something about you. Just as lenders can look at your report and make assumptions about who you are, you can be self-critical and analyze your report on your own.
What’s your number? Before making big financial decisions, it’s smart to know your credit score.
Opening an additional line of credit can be a good way to boost your credit report if you handle it well. If, on the other hand, you have a tendency to mishandle your spendings, another card is likely to do more harm than good.
Bushor advised, “Know yourself before making impromptu financial decisions. Look at the interest rates attached to the store credit card and weigh those against your personal history. Do you always pay enough each month on other lines to decrease the principal as well as paying the interest?”
Some cards come with interest rates so high and minimum payments so low that despite paying the minimum each month, your bill will never go down and could actually increase. If you revolve balances month-to-month, it’s quite likely that you’ll end up paying more in the long run and eliminating the upfront bonuses and discounts.
Above all else, remember that it is ultimately your responsibility to control your finances. Whether you have more credit than you know what to do with or your credit report is anemic, you are at the helm. It is within your power to seize control over your finances and present yourself positively through your credit report. Start with the basics. Educate yourself and don’t make rash decisions.