Should You Get a Store Credit Card?

(This is a guest post by Jim Corbett.)

Sometimes it seems that, wherever you go, someone’s trying to issue you a credit card. This is especially true of discount and department stores, which tempt potential cardholders with promises of hefty up-front savings.

But what is the long-term value of these cards? How can you tell if they’re right for you?

Store credit cards have pros and cons. Experts agree that you should avoid them if you’re likely to carry a balance, if you already have several credit cards, or if your credit score can’t afford a twenty point bruise simply from obtaining a store card!

Interest rates are definitely something to consider before you get one of these cards. Store credit cards have interest rates that are, on average, six to ten percent higher than those of bank credit cards. This isn’t such a big deal if you pay off your balance in full each month. But cardholders who maintain a balance will quickly find that their initial savings are being lost to interest charges. This defeats the purpose of a store credit card, which is to help you pay less for your store purchases.

But there are some good reasons for getting store cards. If you have a favorite store where you’re likely to use the card on a regular basis, getting a credit card from them could be beneficial. Some stores offer substantial discounts to cardholders, in the form of specials, coupons, bonus points, advance notice for upcoming sales, and discounted goods and services. These savings can add up. They also tend to be easier to obtain than a bank issued credit card and can be good for those wishing to build their credit history.

It has been estimated that 500 million store credit cards are in circulation at any given time, and most of them were issued during the holiday season. When you’re frazzled from gift shopping and alarmed by your dwindling bank account, the ten or fifteen percent savings you could get by opening a store card might sound like a good deal. And it can be – provided you pay off the balance before you accrue interest.

Always read the fine print before filling out any credit card application.

Also remember, if you sign up for a store card, you might be signing away your privacy. Some stores are notorious for selling your contact information to third parties, who will then use the information to bombard you with marketing material. Once you are placed on a marketer’s list, you might find it difficult to get off again – and you might regret selling your privacy for that ten percent discount.

Jim Corbett is the CIO of Credit Web which offers Student Credit Cards as well as offering an in-depth supply of credit related information.