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Are Store Credit Cards a Good Idea?

The LearnVest Staff
Posted on October 19, 2009

shopIt seems like credit is drying up everywhere except at retailers’ checkout counters.

The Financial Problem

Store credit cards entice with discounts, introductory rates, loyalty points, pre-sale invitations, free tailoring, free delivery and dangerously low minimum payments. BUT, they also tote horrible (read: HORRIBLE!!!) regular APRs (for example, there’s 20.9% at J. Crew, 21.9% at Banana Republic, and 23.9% at Macy’s, the worst offender) and punishing late fees.

The Solution

Simple: Avoid ‘em…

Minus, the single, one-and-only, exception (which we still don’t even like): If you know you must make a massive purchase at a retailer and want to reap the benefit of the 10-15% discount, fine. But that’s it—and, then, pay it off immediately. Don’t ever make a habit of using this card.

If you’re looking for a good card then consider all of your options carefully. There’s a whole credit card marketplace out there.

The Action

Contact credit card companies, your bank, credit union and other financial institutions to find a card with an APR and fee schedule that allows you to comfortably manage your debt and live within (not beyond) your means. Comparison shopping should take ~10 minutes and will help you find the RIGHT card for you.

These sites will best help you comparison shop:
www.creditcards.com
www.bankrate.com
www.creditcardguide.com

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  • Christina

    I would say there are two exceptions to this rule: one, which you mentioned above, is to take advantage of the one-time 10-15% discount on a large purchase.

    The other exception, which I use, is that often these store cards come with great perks like free shipping or extra discounts during certain seasons. I use the fact that their interest rates are so terrible to force myself to pay them off in full every month (EVERY month) so I can’t abuse these perks, but I still get to take advantage of free shipping, hemming, and special sales. If you know you have the self-control to do this, they can actually be a great boon (not to mention a small boost in your credit score from regular use and full, on-time payment every month).

  • Creolebelle

    I think as long as you always pay off your balance in full, then why would these cards be bad? If you are shopping within your means then you won’t need to worry.

  • Creolebelle

    I think as long as you always pay off your balance in full, then why would these cards be bad? If you are shopping within your means then you won’t need to worry.

  • Kellyn Westra

    Thanks for the advice!