|SHOULD YOU APPLY FOR A STORE CREDIT CARD?|
|Posted on: Mar. 18, 2017 in Credit, Credit Score, Debt|
You’ve been there – you’re standing at the cashier and purchasing some thing, and the cashier asks if you want to open a credit card account. There’s probably a great incentive to join. It seems like a great idea. Is it? That depends.
Store credit cards, also known as private label cards, work hard to get your attention. Typically, they entice you with a terrific perk to get you to sign up. This could be in the form of a percentage discount off that day’s purchase, coupons, low initial interest rates, or other loyalty bonuses designed to motivate your enrollment. For the shopper, it seems like a no-brainer, particularly if they shop at that retailer often. You may wonder if these deals are too good to be true or if there are strings attached. There has to be something in it for the brand.
And, of course there is. Stores know that if a customer has their card and they dangle promotions and sales incentives, the customer will buy. The retailer wants your loyalty. They know that if they set up a program where the more you shop, the more you save, you’ll keep coming back for more. They want you to be hooked and to pull out that card every time you shop.
Beyond being a powerful tool to keep bringing you in the door or to the website, private label cards are a huge revenue-generator for the brand. While some cards may offer an initially low interest rate, many do not. In fact, the interest rate is typically much higher on store cards than on major credit cards offered by banks. They also have lower limits and lock you into shopping in this particular establishment.
By continuously offering you sales and offers, the store can stay in your face and enticing you to shop more frequently than you otherwise might, spending more money and possibly piling on the debt.
After all this, you may think that these cards aren’t worth it at all. The issue certainly isn’t black and white. If you can keep spending under control and pay off the card each month, the incentives may work in your favor. Remember that any new credit cards you open will appear on your credit history and just the inquiry alone when you apply can impact your score. However, if your score is low and you are having difficulty obtaining a major credit card, a store card can act as a stepping stone to rebuilding your credit by offering you the chance to make timely payments and show a positive payment history.
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