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Are Store Credit Cards a Good Deal?

The deal seems too good to pass up – if you open the store credit card today, you’ll get 20% off your purchase and coupons and special deals in the future. Some even offer 0% financing for a set period of time. However, in most cases the best deal is to pass on the store card and use another method of payment.


Weighing your choices

Store cards typically come with lower limits, higher rates and more fees than a card from your credit union. Don't sign up immediately at the register until you've thought through your options.

It’s not unusual for interest rates on store cards to be above 20% APR. And that 0% APR for a year promotion – read the fine print. Most of those promotions come with stipulations about when and how the balance has to be paid off to avoid getting charged interest for the entire period.

You may be tempted to get the store card to build credit. Applying for any sort of credit will show up on your credit report and affect your credit score. Don’t apply for too many cards or loans at one time, and be cautious of how many new cards you have, as the average age of your accounts is a factor in your credit score. Try building credit by applying for a low-limit credit card at your credit union first. You’ll benefit from the lower APR, fewer fees and dealing with someone you can trust.

If you’re getting the card to use in place of a credit union or bank card – think again. Unless the store card has been co-branded, for example with Visa, they cannot be used elsewhere. Typically the co-branded cards come with lower APRs but usually not as low as your Credit Union. The co-branded cards are also harder to get – requiring another application, higher credit scores, etc.

In some cases, getting a store cards might not be a bad idea. If you have a good credit history and do not carry high balances on your current credit cards – getting one or two store cards at stores you go to most often may not affect your credit score significantly. However, you may still get the same APR as someone with poor credit (stores typically charge the same APR for everyone).

If it’s a store you shop in frequently and you plan on paying the card off monthly then you might end up saving with the promotions and discounts. However, if you think getting the card will mean you will spend more to get more rewards, coupons, etc or if you don’t think you can actually pay off the balance every month then say no thank you.