The Pros and Cons of Store Credit Cards

Chances are, you have been offered the opportunity to sign up for at least one store credit card while visiting a major retail chain. These offers are often quite tempting, promising you several exclusive benefits if you sign up. As a savvy shopper, you know there are always two sides to every coin. Before saying yes to the inquiring salesperson behind the counter, here are a few notable pros and cons of acquiring store credit cards.

The pros: discounts, freedom and improved credit scores

Perhaps the biggest perk of signing up for a store credit card is the discount opportunities such a card brings. Tiffany Patterson of SmartAsset reports that when you’re a store cardholder, you are typically eligible for exclusive sales unavailable to other shoppers, and you might get an additional percentage off whenever you stop by the store. This could save you a lot of money, bringing with it a feeling of exclusivity and importance that many consumers find appealing. As a bonus, Patterson writes that many retailers offer an up-front discount just for signing up for the credit card, rewarding you immediately for deciding to take home that shiny new card.

Another major pro is the freedom credits cards bring to your shopping. Having a store credit card means that expensive purchases are no longer as cost-prohibitive, and you can pay them off at a later time. As long as you make responsible choices, this means that your new card lets you, within reason, buy whatever you need. If used in the right way, store credit cards can also improve your credit score, reports Satta Sarmah Hightower of Credit Karma, making them an appealing investment.

The cons: credit limits, interest rates and personal responsibility

There are benefits of having a store credit card, but there are also plenty of risks. The most obvious of these is the role personal responsibility plays in having a credit card. If you routinely overspend when you shop and have problems paying debts on time, a new credit card might not be a good choice. Hightower points out that store credit cards often have high annual percentage rates compared to traditional cards, so carrying a balance when you overspend has larger financial consequences.

Acquiring one of these cards sometimes causes a slight drop in your credit score, according to Patterson. If your score is already low, this could be a problem. There’s also the issue of credit limits, as store credit cards often have smaller limits than other cards. Hightower points out that lower credit limits and your spending could raise your overall credit utilization rate, which tells prospective lenders how much of your available credit you use. The higher that number is, the more difficult it could be to find financing for larger purchases.

In the end, it is your responsibility to make the final decision. By looking at such things as financial standing, goals and habits, you can determine if a store credit card is right for you.

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