Is a department store credit card worth it?


woman shopping

We’ve all been there: you’re at a department store standing in line to make a purchase and the cashier offers you a chance to save a few extra dollars by opening a store credit card. While saving money is almost always an appealing option, you may be wary of opening another line of credit.

Store credit cards aren’t always bad. However, they’re certainly not always good either. Whether or not you choose to open one should depend on a number of factors, the most important being your own financial situation and the specific terms and conditions attached to the card.

The main pros associated with department store credit cards include:

  • Special Discounts: Department stores often provide perks to store credit card holders, including special discounts, free shipping and tickets to special events. If you frequently shop at the store anyway, signing up for a credit card could help you to save a lot of extra money. However, it’s important to look very closely at the rules surrounding the discounts first, to make sure you’re getting a good deal. For example, some stores require you to charge a significant amount before you get access to savings perks. On the plus side, other stores offer cash back right at checkout, which can really add up. Always be sure to read the fine print.
  • Establish Credit: If you don’t have much of a credit history or are trying to repair a damaged one, opening a store credit card can help to raise your score. Department store credit cards are typically much easier to obtain than traditional credit cards. As long as you shop responsibly and pay the balance off each month, it will look good on your credit report.
  • Fund Major Purchases: Some store credit cards offer a zero percent interest rate for the first six months or a year, which can help you finance major purchases when you need them, instead of waiting until you can save up the cash. However, it’s important to finish making payments before the interest kicks in or you’ll owe some serious extra money.

While opening a store credit card can have its benefits, there are also many drawbacks. The biggest cons of department store credit cards are:

  • Lower Credit Score: If you have a good credit score already, opening too many department store cards per year can lower it. Even if you only open the card to take advantage of the initial discount, pay it off, and cancel it, that doesn’t remove the inquiry from your credit report. As a general rule of thumb, don’t open more than one or two lines of credit per year.
  • High Interest Rates: Department store credit cards may have much higher interest rates than you’d find with a traditional credit card. Confirm the interest rate before you sign up for the card.
  • Low Credit Limit: As department store credit cards are typically much easier to obtain than traditional credit cards, you usually won’t get too high of a spending limit. While this can be a good thing, it can also be annoying if you have the money to do some pricey shopping, but can’t put your entire purchase on the card.

Making the decision to open a new credit card is a big deal. You should never rush into something that can have such a huge impact on your finances. While it can be tempting to sign up for a store credit card on a whim to save a little extra money at checkout, don’t do it. Take the time to read the fine print and really think about whether the card is a good fit for you.

There are other credit card options that offer you low interest rates, no annual fees, and reasonable limits. Some cards also allow you to make purchases and reap rewards from purchases outside of a single store. If after weighing your options you decide a store credit card is for you, open an account on your next trip to the store.

 Guest blogger: John Gower, NerdWallet

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