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Store credit cards – The good and the bad

A store card is just another name for a credit card, with the exception that you can only use it in a particular retail chain.

Unfortunately, store cards are rarely designed in favour of the consumer. However, there are a few reasons you might prefer to use a store card instead of your regular credit card, but staying away might work out better for your finances.

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What are the advantages of store cards?

Discount Offers

You will get with discount offers when you sign up for the card. Retailers know it’s hard for any shopper to resist a 20% discount on their first purchase, or 10% off any purchases for the first three months, and many people will sign up for the card without thinking of the consequences.

These initial offers are a great reason to sign up for a store card, as long as you play their game but come out the winner.

The game is simple: stores are betting that you won’t pay your bill off in full, so they’ll end up making money from the interest you’ll have to pay. Not only will they make the 10 or 20% discount they offered you back, but quite a bit more.

So, take advantage of the offers but remember pay your bill in full at the end of the month. If you’re savvy you could even exploit the card to get the most out of the discounts.

If you’re offered a 20% discount on your first purchase, wait to use the card until you need to buy something expensive, 20% of a £500 TV is £100, as opposed to £0.20 out of a £5 pair of socks.

But if you do plan to take advantage of these discounts make sure that you can pay the bill in full at the end of the month, or the interest you are charged could dwarf the value of the money you save.

Membership perks

Some store cards allow you access to exclusive shopping events, similar to a membership club. Having a store card just so you can attend these events and take advantage of the deals they offer, such as early access to sales.

You also get other benefits, depending on the store card. For instance, you could:

  • Free shipping from their online stores
  • Earn points and reward vouchers via attached loyalty schemes
  • Return merchandise without any questions
  • Discounts in their cafes and restaurants

store credit cards - the best store cards

The drawbacks of store credit cards

A Lower Credit Limit

The lower credit limit might seem like a disadvantage, but it’s actually a benefit. If you have a lower credit limit, you can’t spend as much as you would with a standard card.

You could use your standard card to pay for your purchases, but you probably won’t because then you’d miss out on all the discounts.

High Interest Rates

Many store cards can charge very highs interest rates. Many of them charge well 25%, while some go up to nearly 30% which is high compared to a typical mainstream credit card with an APR of 6-20%.

So, if you’re in the habit of overspending, you might want to reconsider applying for a store card.

The One-Retailer Limitation

The problem with store cards is that you can only shop at one retailer. While this might not be such a significant issue if you already use the store frequently, it might become a problem if you don’t.

Shop assistants often have a target they have to meet in terms of selling store cards, which means they will push one on anyone that comes through the doors.

Even if it’s the first time you’ve entered the store, you will likely be offered a card. This is because if you accept it, you may well become a loyal customer because of your card, even if you might never have gone there again otherwise.

But remember, it could be tempting to buy luxuries you don’t really need with the credit and enticing discounts. So, if you know you struggle with temptation, it’s probably a good idea to forego a store card.

While there are certainly downsides to store cards, as long as you keep your spending at a level where you can pay your bill off at the end of the month, there’s no reason you shouldn’t apply for one.

But you have to be careful because it’s easy to give in to temptation and rack up a bill that could take years to pay off.

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