The Pros and Cons of Department Store Credit Cards

We have all been checking out at our favourite department store when the clerk asks, “would you like to apply for our store credit card and pay 30% on your purchase today.” If it is a store we shop at often, we might say yes or we might default to saying no any time we are asked this question. Today we want to take it a step deeper and explore the real pros and cons of using a store credit card.

Pros

There is no denying the benefits of a store credit card. Here are just a few to be aware of:

You can use your credit card every time you make a purchase and rack up points. If it is a store that is a part of a bigger company, you might be able to use the card at multiple stores. Make sure you ask about this when you receive a card. The points will come in especially handy around the holidays when you are making a lot of purchases.
You can use a store credit card as a strategy for increasing your credit score. Since stores are often times more lenient with requirements, you may be able to obtain a store credit card despite the fact that most banks are denying you. Subsequently, you can show that you are credit worthy by being responsible with your spending. Soon enough, your credit score will begin to increase.
You will receive coupons and deal updates in the mail letting you know what is happening in store. This can be a pro and a con because it will keep you informed but might lure you into the store when you don’t need to shop. Be informed yet cautious.

Cons

It is so easy to get caught up in the benefits of a store credit card that you may forget that there are some potential drawbacks:

Higher interest rate. This is something that may not be explained to you upfront, unless you ask. If you decide to carry a balance from one month to the next, you will be hit with a higher than average interest charge.
Since you have a credit card with the store, you may be tempted to “go nuts” and spend more than you normally would. If you don’t trust yourself to be responsible you should pass on this offer for the time being and continue to pay with cash. It is very easy to get into debt in a hurry when all you have to do is “charge it.”
You may fall into the trap of opening a credit card at every store that offers. When you are asked if you want to open a store credit card, don’t be shy about saying no thanks. The opportunity is not gone forever. You can always change your mind in the future.
It can be harmful to your credit to have a card open at too many stores and it becomes easy to lose track of all your finances. When you are charging items on ten different cards, money management can fall between the cracks.

Tips and Tricks:

If you do decide to get a store credit card, here are a few tips to keep you out of trouble.

Pay off your card up front. At most stores you can pay with the store credit card then turn around and pay the “bill” with your debit card. If you do this you will receive the benefits of the card without worrying about having a credit card bill to pay at the end of the month.
Treat it like a debit card. If you act as if it is your debit card and follow the tip above, you will set yourself up to never get into store credit card debt.
Don’t buy something just because there is a benefit include. Remember that even if there is a sales, you are still spending money. Make sure the item is something you really want, not just a great deal.
Don’t make the “store limit” your limit. If your store credit card limit is $1200 but you only have a shopping budget of $400 every month. Make your budget the one you follow.

Questions to Ask Yourself

At this point, you should have a better understanding of both the pros and cons of store credit cards. However, you may still have some questions on your mind. Here are five that you should feel comfortable asking and answering:

1. Can I get store discounts if I use the card when making a purchase?

2. What is the interest rate?

3. Do I shop at the store frequently enough to make it worth my while?

4. Could I apply and use this credit card as a method of improving my credit score?

5. Would I be tempted to overspend if I have access to credit as opposed to being forced to pay with cash?

There is a good chance that your favourite department and grocery stores (among others) will offer you a store credit card at some point. Before you say “yes or no” consider the pros and cons listed above and ask yourself these targeted questions.