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Disadvantages of store credit cards
Signing up for store credit cards can be very tempting especially when shopping frequently at a particular department store or retail chain. However, these popular store cards are often inferior to the traditional offers you may receive from a general credit card. It is important to be aware of the disadvantages of store credit card s before making the choice between a store card and a traditional one.
One of the major disadvantages to store cards are their exorbitant interest rates. The annual percentage rates on most store cards tend to average 20% and above while general cards usually have a lower APR of around 12-15%. If a store card is an absolute must, try to offset the high interest rate by making regular timely payments and not carrying a balance for an extended period of time.
Another major disadvantage to store cards is that having too many of them in combination with regular credit cards cad have a detrimental effect on your credit score. Too many open revolving accounts signals a big risk to lenders as the potential to default is extremely high. Try to limit yourself to one or two major store cards to outlets that you visit frequently. In addition, maintain a low credit to debt ratio by keeping your balance well below the allotted limit given by your creditor.
Another major disadvantage to store cards is that the majority of them do not offer fraud protection. With the increase in identity theft, this feature is almost mandatory for any line of credit you are considering. The absence of fraud protection can leave your credit score open to debilitating damages incurred by fraudulent purchases made on your account.
Perhaps the biggest and most understated drawback to having a store credit card is its inherent pull to cause overspending. Seeing the card in your wallet and knowing that you can have some new clothes or merchandise using only that card may cause you to go well over your budget for items you did not really need. However by simply having the store card, the propensity to use it by shopping at one particular store is increased. On the other hand, traditional credit cards offer more conservative options for spending on everyday items such as gas, groceries, and utility bills. Since these are expenses that you normally incur, using your general credit card to make these purchases does not encourage as much overspending.
In general, store credit cards can seem like a convenient option, especially if you are low on cash. Tempting introductory discounts on merchandise can make it easy to sign up at the register without a second thought. However, it is important to consider the potential pitfalls and disadvantages that come along with store credit cards. In the long run, if given the option, it is better to choose a low interest rate credit card with attractive reward points than a store card with a higher interest rate.
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