Are Store Credit Cards Good or Bad?

by Cynthia Measom, Demand Media
    Jewelry stores often offer credit cards to encourage people to buy.

    Jewelry stores often offer credit cards to encourage people to buy.

    If you ask a random sample of people on the street if store credit cards are good or bad, you'll get different answers. The answer to whether they are good or bad depends on how you choose to use them. Like other credit cards, store credit cards offer you the chance to buy things now, when you don't have or would rather not spend cash. When used responsibly, store credit can be a beautiful thing. However, if you dive in headfirst, purchasing without a thought to how you're going to manage the debt, store credit cards can be trouble.

    Added Benefits

    Yes, a store card does allow you to purchase whatever goods or services are available in the specific store, but you also may reap other benefits. If the store card has a Visa, Discover, MasterCard or American Express logo, you can use it at the store and anywhere else that accepts those brands. Store cards may offer you an awesome discount on your first purchase. For instance, the store may offer to give you 20 percent off of your first purchase when you open the account. A store may also offer a promotional interest rate such as 0.0 percent for six months on purchases over a certain dollar amount. If you're buying a big-ticket item or a new wardrobe of clothes, you could save a bundle. Just make sure to pay the balance off before the interest charges start. Also, you could earn rewards by using a store card, especially with those that carry a co-brand like American Express.

    Get It Now

    If you're unfortunate enough to have a major appliance break down, such as a refrigerator or washing machine, a store credit card can come in handy. Home improvement stores, such as Lowe's or Home Depot, are well-known for running promotional purchase deals to their customers who use store credit cards. Not only can you get the appliance you need now, you can also have time to pay it off during the promotional period.

    The Lows and Highs

    When you compare a store card with a bank credit card, the limits are often lower on the store cards. The average limit of a store credit card is around $1,000, according to information on the Bankrate website. The interest rates don't follow suit. Store credit cards are notorious for having interest rates of 20 percent or more, which are historically high rates. Steer clear of store cards if you don't think you can use them responsibly, such as paying off the balance before a promotional period ends or the interest starts building. Check out sites such as Nerd Wallet and Finance Globe to compare store credit card offers. You can compare interest rates, annual fees promotions and other important details.

    Easier to Obtain

    If you've tried to get a bank credit card, but can't, you might be able to score a store credit card instead. A store credit card can help you build credit. Even though the limit might be low and the interest high, you can use it as a tool to charge small amounts each month and pay them off. This behavior will show that you are financially responsible and help you qualify for a better credit card with lower rates and more benefits. Before applying for a store credit card, make sure you meet the store's criteria for credit and also find out whether they report to at least one of the three major credit bureaus: Experian, TransUnion or Equifax. If they don't, using their card won't help you build credit.

    Temptation

    If you snag a credit card for your favorite clothing or home improvement store, you can suffer from temptation to buy. Every time you pass by the store, you'll probably think about something you can buy that you really don't need -- a new pair of shoes that won't fit in your closet or a tool to add to all your other tools that take up space in the garage. Store credit cards, not unlike other types of credit cards, can provide a means of getting yourself knee-deep in debt.

    About the Author

    Cynthia Measom wears many hats. She's a writer and the owner and accountant of a nanny placement agency she founded in 2007. Measom received her B.A. in English from the University of Texas at Austin in 1997. She is currently pursuing a B.S. in business administration with a concentration in human resources.

    Photo Credits

    • Dynamic Graphics/Creatas/Getty Images