Pros and Cons of Department Store Credit Cards
Saturday, February 23rd, 2008Many people start off their credit card history by getting a department store credit card. These cards are easy to get even when you haven’t yet established credit. However, people who are new to credit cards often make mistakes that land them in financial trouble. Department store cards can be particularly bad in terms of fees and interest rates. As a result, people frequently swear off department store credit cards after their first bad experience. The truth is that there are both good things and bad things about these types of credit cards. The key is to know when to use them and how to use them properly.
The obvious benefit to department store credit cards for many people is that they offer a way to start getting credit cards before you’ve established a good credit history. They require very little income and credit history and you can often get them right when you’re there in the store. Another main benefit to department store credit cards is that they often allow you to get discounts on your purchases, especially on those purchases which are made when you first sign up for the cards. This can make department stores a great tool in saving money at the places where you like to shop. For example, stores like The Gap and Macy’s offer perks for cardholders on each purchase.
However, there are department store credit card drawbacks to consider. First of all, once you have access to the card, you may find that you’re spending more money at your favorite stores than you can really afford. If you can’t pay off your balance in full each month, you’ll quickly see that these cards have high interest rates and finance charges which drive your bill up rapidly. This can cut into the savings that you gained initially and ultimately cause you to spend a lot more money on the items you buy than you would spend if you bought them with cash. In this case, it would be better to get a low interest card and use it for your purchases instead.
The key to using department store credit cards is to make sure that you are responsible with them. You should only buy things that you can afford to pay off within a month of purchase. You should be able to pay the bill immediately when it comes in. This will prevent you from getting late fees and racking up interest while still allowing you to take advantage of the sales that you can get when you use the card. If you don’t think that you can practice this kind of self-restraint and financial responsibility, then it is probably not a good idea to get department store credit cards.
