Retail Store Credit Cards

Department Store Credit Cards

During holiday shopping you will frequently be asked by the store clerk “Would you like to apply for a store credit card and save 20 percent on your purchase?” Should you do it? I found a really good article in our local paper that discusses the pros and cons of retail store credit cards.

Risks - One factor to consider is are you likely to carry a balance on your department store credit card. Store credit cards frequently come with high interest rates, so any discount you get up front could quickly be erased. For instance the J.C. Penney card has an interest rate of 23.99 percent. Another risk is that if you don’t shop at the store often you will be slower to recognize identity theft. Even though you are not liable for the charges sorting out the mess will be time consuming.

Credit score impact – Applications for new credit, whether it’s a store or bank card, can lower your score. Especially if you open several cards over just a few months. Given this tight credit environment, you might also be tempted to open a store card as a way to boost your credit line (which is another factor in your credit score). But store cards typiclly come with lower credit lines than bank cards. The dip your score initially takes will probably outweigh any positive impact, too. Generally a store card will not affect your score as badly as a bank card partly because store cards can only be used in a limited way.

Rewards - The advantages you receive with department store credit cards sound the sames as reward cards, but there is a difference. With traditional cash-back rewards cards, you get rebates on purchases you make anyway. Here is a list of some of the best credit card rewards cards:

If you are building a nest egg – For every $100 you charge with your Fidelity Investment Rewards Visa Signature Card, $1.50 gets deposited into your Fidelity brokerage account, where you can invest it however you choose. The reward jumps to $2 after you charge $15,000 for the year.

If you want cash back - Pentagon Federal Visa Platinum pays you back 5 percent on gas purchases, 2 percent on supermarket purchases and 1 percent on everything else, crediting the money back to your account. There is a one-time $20 fee if you don’t meet their membership requirements.

If you’re saving for vacation - The Captiol One No Hassle Miles Rewards Credit Card gives you one “mile” for each dollar you spend (and two miles after you spend $1,000 for the month). Multiply the price of your ticket by 100 to determine how many banked miles you need to buy it- on any airline with no blackout dates.

If you charge a lot - With American Express’s Blue Cash card you earn just half a percent cash back on your spending – until you have charged $6,500 for the year, and then the rebate jumps to 5 percent at the supermarkets, gas stations and drugstores and 1.25 percent everywhere else.

With store cards, the deals are intended to make you spend more. So if these offers will make you over spend best not to have the temptation.

Summary – Store cards can work to your advantage if you are a regular shopper and capitalize on the year-round discounts. Your store might also offer valuable perks such as free shipping. If you do decide to open an account at least wait until you make a large purchase to get the maximum advantage of the initial discount.

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