Store Credit Cards: Pros and Cons

There seem to be any number of credit cards available today. Banks and building societies have always been the traditional suppliers, but increasingly individual retail stores are offering customers credit card finance options. So what are the positives and negatives about signing up for a credit card?

Pros

Discounts

Applying for a store credit card is a simple way to get a discount on your shopping. Companies will make these discounts a prominent part of their strategy to gain customers and promote brand loyalty. If you use a shop often, a credit card supplied by that store can help bring down the costs.

Promotions

To entice customers to take up the credit card, stores will often offer special promotions only open to card holders. These may take the form of extra discounts on purchases during certain periods or a greater accumulation of points on a reward scheme for using the card.

Credit Rating

Store credit cards are generally fairly easy to sign to. This means that individuals looking to increase their credit rating have the opportunity to set up a line of credit.

Limits

Credit cards offered by retail companies will usually have a very low minimum spend limit. This is particularly true of cards offered by supermarkets, who realise that people may wish to use their card for a quick shop. It means that you are more likely to be able to keep a lid on your spending without having to add extra unwanted items to reach a higher spending threshold.

Links

If the store credit card is co-branded with a financial supplier such as MasterCard or Amex you may be able to attain discounts and other benefits at other retail outlets. Be aware, however, that co-branded cards often have higher interest rates as they represent a greater risk for the issuing store.

Cons

Interest

Store credit cards are renowned for having high interest rates. These rates can often be 20 percent or more. This is not a problem if you are assiduous about paying off all your balance at the end of each month, but this is not always possible, particularly at times such as Christmas. If you are not sure that you will be able to clear your balance every month, store credit cards are not the best option as the interest payments can quickly mount up.

Temptation

A store credit card is another spending temptation. Particularly with the discounts offered, it can be hard to keep track of your spending, as opposed to, say, cash or a debit card.