Store cards can be advantageous to your credit score when managed correctly and are often much easier to qualify for than traditional credit cards. While they’re great starter cards, there are also a few other instances when it makes sense to open a store card. Here are some times when opening a store card is a good idea.
1. When You’re Trying To Rebuild Your Credit
Depending on how damaged your credit is, this process can be long and arduous. Store credit cards traditionally have lower credit limits than traditional credit cards, so you’ll be borrowing less money.
If you keep your purchases small and never max out your store card, you can use it to begin to repair your credit. Credit cards can be risky with their high-interest rates (store cards having even higher rates) but a good store card will help teach you discipline and start to bump that score back up.
Always make payments on time and for more than the minimum amount, especially when you’re rebuilding credit. Creditors want to see trust between a borrower and a lender, and trust is best established by paying what you owe when you owe it.
If you need to make any large purchases, one good practice is to put the card away and not use it until you’ve paid the large purchase off. That way you don’t get close to your max and you can keep your interest payments down as much as possible.
2. When You’re Just Getting Into The Credit World
The credit world doesn’t have to be intimidating. If you start off on the right foot, you’ll find that building credit is actually a simple process that largely counts on you keeping your financial obligations. If you borrow money, pay it back, on time and in full.
When you first start out, you’ll likely be bombarded with credit card offers. While it’s best to consider each offer individually and compare things like APR, max limits, late fees, and annual fees, a store card can be a good option for first-timers.
Store cards have lower limits so you’ll learn to manage your money with a smaller amount starting out (instead of gambling thousands of dollars). This allows you to learn the discipline of controlling your shopping habits and only buying what you can afford to pay for later (plus interest).
Store cards do have higher interest rates, but this will also help you be careful with your spending. With a higher interest rate, discipline is a must. Learn to purchase responsibly, and you’ll be well on your way to generating an impressive credit score.
3. If You Need An Appliance Or Other Large Household Item
Are you moving into your first apartment and need a couch, refrigerator, and other furniture? Maybe the flat screen finally went bad or got knocked over? These are all items you can finance on a store card.
Most stores offer promotional interest as well for large items such as appliances, you may get a reduced or even waived interest rate if you pay within the promotional period. These can range from 30 days to 12 months, depending on the retailer.
TVs are generally expensive the bigger the screen. Smart TVs and ultra-high-def are especially costly. If you’ve got the extra income to finance one, using a store card to do so will help you get the item you want while building up your credit.
So next time you find that you need a new appliance, try financing it with a store card. Most retailers offer a version of the store card, so no matter what you need, there’s a card to meet your needs.
4. When You Want Store-Specific Savings and Offers
If you’re looking for store-specific discounts, sales, and other offers, most store credits offer these and more. If you want to save money at your favorite retailer, inquire about their store card and see what exactly the card has to offer.
Cards such as the Nordstrom Rack credit card have amazing benefits including access to special sales and prices, extra store services, and even invites to special events hosted by the company.
Benefits will vary among companies, but most will at least offer a rewards program. Every time you buy an item, you’ll rack up points which you can usually trade in for store vouchers or discount coupons.
Don’t Forget About The High APR and Late Fees!
With all the excitement of in-store savings and offers, it can be easy to forget that store cards have a few disadvantages, like high APR and late fees.
Most APR rates for traditional cards will be somewhere between 16 and 24%, but with store cards, you’ll usually find the rates in the lower 20s even into the thirty percent range. Keep this in mind when you’re making purchases. You’ll end up paying interest on your card’s balance, which can make it difficult to pay off the original amount.
Always Do A Comparison
As with any financial product, before you sign up for a store card it’s a good idea to shop around and compare interest rates and benefits. Choose a store you know you’ll shop at least a few times per month, but also that you can control your spending at. Once you’ve chosen a card, set a monthly budget for your spending and stick with it!