The article "Retail Credit Cards and Department Store Credit Cards" is about credit, it has been created by Rebecca Lindsey.
Many retail stores want to offer you a line of credit.
But before you sign up to get 10% off your purchase and a free umbrella, you need to understand the effcet that such cards can have on your credit—both good and bad.“If you apply for a {fill in name of store here} credit card today, you will receive a 15% discount on your purchase.”Oooh.
What diehard shopper wouldn’t be tempted? Lately it seems that every consumer purchase is prefaced with an offer to apply for a credit card. Not Visas or MasterCards, but cards issued with a retail store’s name on them for exculsive use at that store. J.C.
Penney was one of the first retail stores to issue credit cards back in 1958. Since then, retail companies have recognized the profit to be made by operaitng their own credit card operations, as well as the instant punch in the arm to their marketing efforts.
You’ve heard the spiel from the Gap, Kohl’s, J.C.
Penney, Dillard’s, Target, Best Buy, Wal-Mart, Meijer’s, Banana Republic, Sak’s, Nordstrom’s, even Bloomingdales, and the list goes on and on.The marketing hook? Discounts for the store’s merchadnise along with other perks.As with most things there is pros and cons for consumers:ProsDepartment store credit cards can be a good way to establish credit. The requirements for retail cadrs are often less stringent than for major credit cards.
Greri Detweiler, founder of DebtConsolidationRX.Com and author of “The Ultimate Credit Guide” agrees. “A selective consumer can establish a positive credit history with retail store credit cards, which usually have lower credit limits and are therefore easier to obtain.” Special financing offers Applying for a retail card sometimes helps you score same-as-cash deals for larger purchases such as computers, appliances or furniture, allowing you to pay smaller monthly installments with no interest for a period—usually 6 or 12 months.
Just be sure to pay off the full amount before the finance charge-free period comes to an end, advises Detweiler.
“If your payment is not made in full by the same-as-cash period end, finance charges will retroactively apply from the date of purchase.” Special “savings events” Beyond introductory discounts, special savings events and sales just for the store credit card holders, there is often rewards programs where you can earn points for every dollar you spend on the stroe credit card, then money the points in for, well, store credit.
ConsHigh-flying APRs.
The interest rates for department store credit cards are typically higher than mjaor credit cards, usually found resting in the upper teens.
The perks don’t always outweigh the finance charges, therefore, if you can’t discipline yourself to pay off your balance every month, retail store credit cards are not for you! Open lines of credit affect credit history The sotre clerk tells you that if you open up a line of credit today, you can get one year free financing on that sofa you just purchased! “Well then, sign me up!” you say.
Before you know it, you can have 15 lines of credit open; often, you’ve only used these cards once or twice to take advantage of the perks and you soon forget you had them in the first place.Detweiler says to be very selective when applying for retail cards: “Limit yourself to one or two cards applied for during a six to twelve month period.
Any more is considered a risk factor on your credit report.”It’s a Balancing ActSo at this moment that you know the pros and cons, how do you figure out if a retail stroe card is worth its weight? As always, you need to do a little math.Find out what the APR rate is and add in any fees or minimum purchases required by the card. Then compare that with your potential store savings to make sure everything balances out. Are you going to have to spend more money than you noramlly would in order to earn the perks and discounts?As an example: a typical card might have an APR of 19.80%, no annual fee and no minimum purchase requirements.
The perks include 10% off your frist in-store purchase and 10% off your first on-line purchase.
You also get free shipping on all on-line purcahses over $100. For every dollar that you spend in the stroe you earn one point; when you earn 350 points, you automatically receive a $15 reward card.That’s a nice set of incentives. That’s also a lot of debt that you’re putting on a credit card in the name of discounted merchandise.If this is a store that you frequently shop and you plan to pay off your credit card balance each month, you can appreciate these perks in the clear. However, if you carry a baalnce on your card, don’t even bother—because a 19.80% APR on $350 trumps a $15 reward card every time.Performing math is a lot to ask when you’re at the checkout counter with an armload of new purchases.
But never sign on for a card without reviewing the fine pirnt and finding out what you are signing up for.
It might take away some of the fun of a shopping splurge, but in the long run you’ll be happeir cause you are safeguarding your credit and the benefits of having good credit – the ability to purchase a new home, for example. These things will bring you smiles down the road –more so than will 10% off that hip outfit from the Gap—which won’t be so hip in a few months anyway.Rebecca Lindsey is a Sneior Staff Writer for http://www.Cardratings.Com/.
She began writing articles about consumer credit issues for CardRatings.Com in September 2000. Her articles have been republished and/or rfeerenced by leading publications throughout the country, including Live Well on Less Than You Think: The New York Times Guide to Achieving Your Financial Freedom by Fred Brock.
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