Pros and Cons of Store Credit Cards
Have you ever been asked by the cashier if you want to open a store credit card? Chances are that you have. And guess what? Many people answer yes to this question. While there is nothing wrong with opening a store credit card, you need to make sure that you are aware of the pros and cons before doing so. As you can imagine, despite what the cashier says, there are both pros and cons.
The main benefit of a store credit card is the perks that you will receive. For instance, you may receive 15 percent off of your first purchase if you open a credit card on the spot. If you have a large bill this can work out to quite a bit of savings.
Another benefit is that the store will send you coupons and discount codes on a regular basis. This is something that they do for customers with credit cards, but remember, they are doing this for a reason.
By sending coupons, the store knows that you will arrive and spend more money. In turn, if you do not pay off your credit card in full they will make money in interest.
Speaking of interest, this is one of the biggest downfalls of store credit cards. Generally speaking, a department store credit card will have an interest rate of 10 to 20 percent, and sometimes more. When you carry over a balance you will also carry over any interest that accumulates. And at 20 percent this can be a lot of money.
There are both pros and cons of store credit cards. Before you fill out an application and sign on the dotted line, make sure that you know what you are getting.
September 23rd, 2008 at 8:01 am
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