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.