Are Store Credit Cards Worth It?
Q: Are store credit cards worth signing up for, and how do I keep from getting so overwhelmed by it all?
A: It seems that every time shoppers go to a store, they get bombarded by offers to sign up for a store credit card, and it can be so confusing.
Stores are gung-ho about their cards because they help create customer loyalty and can help track customer buying habits.
For customers, store credit cards offer extra savings and provide a heads up on special sales coming up.
Above all, if consumers can’t pay off their balances in full, it’s best to avoid store cards since interest charges are higher those of bank cards.
According to Greg McBride, senior financial analyst at bankrate.com, a typical store card is now charging interest of 19.8 percent, compared to a bank card, which currently charges around 13.5 percent.
Another issue to keep in mind is that taking out too many cards at once can actually hurt one’s credit score.
"They can definitely be a good deal, but they have to be used wisely," said Andrea Rock, senior editor at Consumer Reports.
For example, if a customer is buying a $2,000 couch, and can get 10 percent off upon signing up for a card, then he or she should consider the offer, according to Mallory Duncan, senior vice president and general counsel at the National Retail Federation, the retail industry trade group.
Duncan also noted that shoppers should focus on stores that they like and are most loyal to.
"What you don’t want is to open up a credit card in every store in the mall and leave a trail of credit inquiries in your wake," said McBride.
At the same time, consumers shouldn’t close their lines of credit from store cards either, particularly right before applying for a mortgage or a car loan.
That means looking at the grace period - from the end of the billing cycle to when the payment is due.
- Source: AP, via The Mercury News, June 28, 2006
