Are Store Credit Cards a Good Idea?
Taking advantage of incentives without putting your outlook at risk.
Am I tempted to get an extra 10% off when they tell me all I need to do is apply for a card? Absolutely.
Someone who has good credit, it’s really nominal and if you’re making a big enough purchase – a thousand dollar purchase – saving 10% is a $100.
But people who are in the process of rebuilding their credit, don’t have perfect credit – unexpected expenses happen. People get sick, people change jobs, and you’ve got this debt and before you know it, it turns into a cycle of debt and you’re paying interest every single month.
As long you’re being responsible, and you’re paying these accounts off at the end of the month, if you can get an advantage by applying for a new card or by acquiring points or by acquiring multiple points because of the type of purchase it is, I encourage that.
An expert answer from Gary Herman
As a rule, you should pay off a store credit card balance in-full within the first billing cycle. In other words, you make your purchases on credit to earn the rewards, but you pay off the debt immediately after it’s incurred to avoid high interest charges and hidden fees that may come up if you allow the account to carry a balance from month to month.
With that in mind, store credit has to be used sparingly and strategically so you’re not taking on so much debt that you can’t pay it off in within the month the charge was made. That means that when it comes to big purchases for things like electronics, furniture or a new wardrobe, the best strategy is to save up in advance as if you were going to make the purchase in cash. Then once the debt is incurred, you pay it off immediately.
Using this strategy, store credit can be used effectively to take advantage of the rewards and incentives the sales associate is promoting without putting your financial outlook at risk. You have to be a little more disciplined than you would even for a traditional credit card, but if you have the means and the restraint to do it the right way, then even these “risky” credit cards can be worth it in the end.