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Store credit cards – The good and the bad

A store card is a credit card issued by a retailer, usually they offer in-store discounts and loyalty points

Traditionally you could only use your store card as a credit card with the retailer that issued it, but now most store cards can be used anywhere and many have competitive rates and 0% interest offers.

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What are the advantages of store cards?

Store cards can be a useful card to have in your wallet if you find yourself spending regularly in the same store.

Discount Offers

You will get with discount offers when you sign up for the card, such as 25% off your first purchase, or double reward points for the first year.

These initial offers are a great reason to sign up for a store card, but make sure to keep an eye on the balance on the card and the interest you’ll be charged.

And if there’s no 0% interest offer included you should aim remember pay your bill in full at the end of the month, or you’ll find the interest charges making the card not worth the discounts.

An make sure to get the most out of the discounts. For example, 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 £1 out of a £5 pair of socks.

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

The drawbacks of store credit cards

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.

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 traditionally charged high interest rates, often around 25%, while some go up to nearly 30%, this a little bit steeper than a typical mainstream credit card with an APR of 6-20%.

So, if you’re in the habit of spending more than you can repay it’s worth considering carefully before getting one of these cards.

The one-retailer limitation

Most store cards only offer discounts and rewards with one retailer, and some might only allow you to shop with them (though this is less common these days).

This might not be an issue if you shop at that store frequently, it might become a problem if you don’t.

 

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