Going For Store Credit Cards Could End Up Costing Consumers More

As credit cards go, store credit cards have one of the most tempting offers: instant discounts. With the holiday approaching, more and more consumers are going to be looking for ways to finance their holiday shopping and, for consumers who shop at major store chains, store credit cards are going to look very attractive.

In reality, store credit cards may actually end up costing consumers more compared to regular credit cards. That is going to be hard to remember for consumers who are going to see store credit cards being offered with tempting discounts by stores looking to up card sales as the holiday approaches.

According to Credit.com’s Adam Levin, “You must always beware of retailers with credit cards pushing gifts”.

Although store credit cards might offer impressive 10%, 15% or 20% discounts for consumers who open a store credit card, in the long run, that card is going to end up costing the consumer even more. Leslie McFadden of Bankrate.com explained, “They typically have low credit limits, and they have high interest rates. So if you’re going to revolve a balance, they’re not the best credit cards to use”.

For consumers who think that store credit cards, which are much easier to apply for, may be a great option for building up their credit score by building credit history, that does not work either. According to Levin, a consumer who wants to build up credit history should go for a general purpose credit card that offers aggressive pricing so that he or she can get the best deal in terms of rates. Store cards should not be where these consumers are going.

Some consumers may want to take advantage of the discounts store cards offer by opening an account or a few accounts, using them and closing them right away. This is also not a good idea. Even if the consumer plans to pay each card in full before closing them immediately, doing so will still hurt them. Opening a credit card and then closing them immediately is a questionable move for credit scoring institutions. Closing a credit card also lowers the available credit of a consumer which means that the ratio of their debt against their credit limit goes up resulting in a drop in their credit score.

Basically, store credit cards are really not a good option for consumers. They may useful for the handful who have really no other alternative, though, it will ultimately worsen things for them in the long run. For most other consumers who are looking for a great credit card bargain, a better way is to hunt for regular credit cards offering excellent terms and apply for those instead.