Nine Disadvantages of Store Credit Cards
Have you ever visited a department store and looked at the store credit card? It may seem very tempting to sign up for it. However, these store credit cards can be the start of a credit trap. We’ll discuss the disadvantages of store credit cards in this post. It’ll help you see why you want to avoid having one at all costs.
Nine Disadvantages of Store Credit Cards
1. Store Only Limited Use Credit Options
Store-branded credit cards usually have a very small acceptance pool. You’re only able to use it at the specific store and participating partners. This means that this card could potentially go long periods without use. This can actually hurt your credit score if you leave it to sit long enough. Additionally, most cards aren’t widely accepted brands like Visa or MasterCard. This can lower your acceptance rate even more. Consider carefully if you should have a store credit card.
2. Low Impact on Your Credit Score
A huge selling point of credit cards is that they can improve your credit score. Unfortunately, store credit cards have a lower overall impact when it comes to raising your credit score. It may improve your score with a strong payment history. However, it won’t count as much as a traditional credit card from a well-known brand will.
3. High Interest Rates is One of the Main Disadvantages of Store Credit
Traditional credit cards can have high interest rates depending on your credit score. But, those interest rates pale in comparison to store credit cards. It’s not unusual to see a store credit card with an interest rate will into the 30-percent range. It can get expensive for people who routinely carry balances from month to month. You could almost double the amount you pay for an item in interest fees alone.
4. Low Credit Limit on Some Store Cards
Most store credit cards come with very low credit limits. They may improve over time, but it’s rare to find credit limits over $1,000. This drives your credit utilization up, and this can hurt your credit score. For example, say your store card has a $100 credit limit. You want to keep your credit utilization at or under 30-percent. To do this, you should never spend more than $30 per month. For most stores, this will barely pay for one item.
5. Deferred Interest Options on Store Credit Purchases
A lot of store credit cards advertise store financing promotions that cardholders get 12 months of deferred interest. This can lead people to believe that it’s zero interest, and there’s a huge difference. True zero interest cards say something like, “0-percent APR on purchase for a year.” Deferred interest cards say. “No interest if you pay in full within a year.” The “if” is huge. It means that if you don’t pay off your balance, you’ll pay retroactive interest rates. The manufacturer will add 12 months of interest onto your balance.
6. Few Store Card Reward Point Redemption Options
Not only are the rewards lower, but the redemption choices are as well. You may earn rewards points, but only if you shop at that specific store. You typically earn between three and six points per dollar. However, you’ll need around 5,000 points to earn a gift card worth $25. You’ll have to spend over $1,500 to get $25 in rewards, and this doesn’t add up in your favor.
7. Store Cards Can Encourage Excessive Spending
Once you sign up for a store credit card, they’ll swamp you with offers. Typically, you can expect emails about sales, discounts, and rewards for spending. This can encourage you to spend more than you normally would. This is one quick way to get into debt that just keeps piling up. Additionally, your card may get a credit increase. This increase can encourage you to shop even more.
8. Retail Store Closing
Retailers close all of the time, and sometimes without warning. Once the store closes, you can’t use your card anymore. You’ll still be responsible for any balance or interest charges. You want to pay them whether or not the store is still active. However, you’ll lose all of your rewards once the store closes. You won’t get a payout or anything. It’s best to spend them quickly if you know that the store is going to close soon.
9. Finding the Terms and Conditions is Confusing
You usually get your store card as soon as they approve you. Then, you’ll get a small brochure that outlines some things about your card. However, you won’t have a lot of time to look at them or compare it to other cards. This means that you may rack up a balance without truly understanding what it’s going to cost you. It’s a fast way to get yourself into debt and have trouble getting back out.
Reasons to Consider a Store Credit Card
Avoid store credit cards as much as you can. There are legitimate reasons to get a retail credit card. Only apply for a store card that offers special discount deals for a store you frequently shop. Below are review articles for some of the most popular store credit cards. Consider these store cards carefully before applying. If a store card suits your lifestyle and offers special store card only deals, then it could prove very helpful. Just keep in mind that you should pay your balances in full each month to avoid interest charges. Otherwise, these high store credit card interest charges will negate the value of these store card only deals.
10 Best Store Credit Cards to Build Credit With Easiest Store Credit Card Approvals
Walmart Credit Card
Target REDcard
Macy’s Credit Card
Nordstrom Credit Card
Kohl’s Credit Card
Home Depot Credit Card
Lowe’s Credit Card
Carter’s Store Card
Bottom Line on the Disadvantages of Store Credit
You want to avoid store credit cards as much as you can. The rewards you earn simply don’t outweigh the negatives that come with these cards. Look to see if a secured credit card is good for you to build your credit. They usually have better interest rates and more opportunity to advance to a better card. Finally, make sure you clearly know the disadvantages of store credit cards before applying.
- Milestone Credit Card Review – Milestone Mastercard® - February 21, 2023
- Capital One QuicksilverOne Rewards For Fair Credit - September 24, 2020
- Wayfair Credit Card Now Issued by Citibank Review - September 21, 2020
