What you need to know about store credit cards and credit scores
Store credit cards, also referred to as retail credit cards are credit cards issued by retail stores. Mostly these cards allow for purchases from the issuer retail store and a few other stores. Some though can be used in more stores. These cards come with so many perks and offers. As such, they can be a good way to save up on purchases on your retail.
Store Credit Cards Advice
However, before applying for that card you need to be cautious. Always ask yourself whether you need the card. Also, store credit cards tend to have high-interest rates on balances accrued. If you are not the type to pay up on balances keep away.
Personal Factors to consider before taking up a retail card?
Even before you say yes to that offer to enroll for that credit card program you need to determine whether taking a card will be worthwhile. Below are a few yardsticks you can use
1. Analyze the necessity
Despite what you might be told, there are no free credit cards. Therefore you have to ask yourself whether you need one. If you are taking up a card to build up on your credit history retail credit cards may be your thing. Nonetheless, if you are taking up a credit card for shopping sprees, you are better off with a bank backed credit card. They are more convenient.
2. Check up on your credit card holdings capacity
Holding up on a huge number of credit cards is never an advisable thing to do. It leaves you prone to forgetting to pay up on some of the card balances. Additionally, having idle credit cards on your credit file does not mirror well among credit issuers.
3. Checking up on your payment prudence
Taking up a credit card may seem like a sweet thing until one has to start paying up. If you are always will running late on insurance premiums and utility bills then credit cards are not for you.
4. Savings vs. cost
If that retail credit card is being sold to you as a way of saving on purchases consider looking at how much you are likely to save. If you are spending more on interest payments than you are saving you might be better off without that card in tow.
What to look for in store credit cards
The interest charged on that card determines the cost of holding that card. Store credit cards generally charge higher interest than banks. In the United States, for instance, they charge interests of between 27% and 30%. As a rule of thumb, if the interest charged is higher by more than 10% the rate charged by banks, it may be time to turn your back and say bye.
2. Retail credit cards purchase exclusivity
Certain store issued credit cards can only be used within their stores and a chosen few stores. On the other hand, other retail cards allow for use of the cards in a variety of places. Cards that are Visa, American Express or MasterCard enabled are more suitable since they can be used in many places across the whole world.
3. Card limits
Most retail credit cards carry a lower purchase limit than bank issued credit cards. This may inhibit your ability to purchase certain items on credit. If you are likely to use credit cards to purchase high-value items then you should consider using cards issued directly by banks. Otherwise, if you are a good customer you can always try to negotiate a review on your limits.
4. Cash back offers
Retail store managers know that you are likely to have another credit card tucked in somewhere else. To entice you to use their cards they will give you offers. One common offer is the cash back offer where for each purchase made on the credit cards you earn points. These points can be redeemed by purchasing another item in the store. Sounds free? Most retail card issuers have this program, so why not jump in on it. While at it, choose a card with the best offer.
5. Reward redemption schemes
Certain card issues have rewards schemes. Some offer rewards on reaching a particular level of purchases. Others offer rewards on card application anniversaries. Consider the rewards on offer and how redeemable they are. As regards redemption, some cards will allow your rewards to remain redeemable within a period of up to 24 months while others will only give you a few weeks to redeem your rewards. Also look at whether the reward can be converted into cash (not available on most cards) or you have to spend the reward in the store.
6. Special offers for credit card holders
A good number of stores of have other special offers tied to their credit cards. Some may give retail card holder’s priority purchase rights on certain items. Additionally holding the card might allow you to benefit from discounts that are exclusively given to credit cardholders. Other retailers, such as Amazon, offer competitive if not free offers for shipping and packaging.
7. Credit reference bureaus reporting
Do all store credit card issuers report your spending history to CRBs? No, not all cards. If you are looking to improve on your credit history you should ask if there are report submissions to CRBs. The more the number of CRBs receiving the report the better.
Benefits and drawbacks of holding store credit cards
• Retail credit cards are easier to apply and gain access to as compared to bank credit cards.
• They can be a good way for bad credit holders to improve their credit scores
• These cards come with lots of offers, rewards, and promotions
• For a prudent spender, the cards can offer high margin of savings on purchases
• Generally, have expensive interest rates as compared to bank credits.
• Require lots of prudence when making purchases
• Most of them come with low credit limits
• Most retail credit card issuers are never out rightly forthcoming on any hidden charges and fees.
• Applying for a large number of these cards can be bad for your credit scores. Numerous hard inquiries for credit scores by card issuers reflect badly on your credit file
Are retail credit cards worth taking?
It all depends on your needs and spending habits. Retail credit cards are a good form of credit history build up but they are quite expensive. If you are able to spend more and pay on time, you can apply for that card. However, if you have a poor credit card history, pocket your hands and walk away. Otherwise, shop around for the best offers, because there is always a better offer somewhere.