Understand Store Credit Cards To Save

Maximize the incentives on store-branded credit cards

Shaun Plum
MoneyTips Contributor

Borrowing Credit Cards

Understand Store Credit Cards To Save
October 31, 2016

With the holiday season approaching, people may notice the attractive deals and incentives attached to store-branded credit cards. In the right situation, these credit cards can provide savings, but they are not necessarily right for everyone.

A recent study found that, while the national average interest rate for a credit card is 15.22 percent, store cards have a much higher average at 23.84 percent. To save money, it is vital to understand the perks of these cards and how to escape the pitfalls. For example, taking out a retail credit card is worthwhile for one large purchase, or for someone who is a regular shopper. It is extremely important, though, to regularly pay off the full balances to avoid racking up high interest charges.

Expert Matt Schulz warns of introductory zero-interest rates on store credit cards. He explains that if your credit card balance is not paid off by the end of the complimentary period, interest may be calculated on the full balance for the entire time, rather than just on any remaining debt. "It can be a tempting thing because of those discounts," Schulz says. He recommends reading the card brochures carefully before taking out a store credit card, so that you can make a more informed decision.

Store credit cards can help you improve your credit score, because the qualifying standards are often lower, but it is vital to repay the balances on these cards in full. Then, once your credit score has increased, you can switch to using credit cards with lower interest rates.

If you want more credit, check out MoneyTips' list of credit card offers.


Photo ŠiStockphoto.com/simpson33

  Conversation   |   7 Comments

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Erin | 10.31.16 @ 15:22
I only get store cards if it is a place that I regularly use. Otherwise, it is not worth it to me to bother opening one. I also make sure that if I do use the card, I pay it off as soon as the purchases post. I've forgotten to do that once or twice, and the interest rates ended up being no savings at all. Live and learn, I guess.
Brittany | 10.31.16 @ 15:23
I don't have any store credit cards, but I have considered getting one in the past to help boost my credit score. This was great info to know.
Carla | 10.31.16 @ 15:24
We have one store credit card that we use in case of emergencies and are sure to pay it off with the first statement. It would be so easy to max it out so we have to have self control. I read over the terms of service each year to check for changes.
Jane | 10.31.16 @ 16:14
I did not know that if the full balance is not paid for during the introductory period on a store card that I could be charged interest on the full balance, not just on what balance might be remaining. This is very important and I won't forget that tip.
Chrisitna | 10.31.16 @ 16:24
I tend to stay away from store-specific credit cards. I haven't found a deal. yet worth opening another account,.
Saving in WI | 10.31.16 @ 18:28
A lot of stores make more money in the credit card business than they do with actual sales. There is a reason that the Big stores offer credit cards, they make huge money on the interest. Do not open store credit cards! If you need to do that, you can not afford what ever you are buying!
Zanna | 10.31.16 @ 20:45
We have used store credit cards a few times for very large purchases when it helped reduce the item's cost, but for the most part they do not seem like a good idea.
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