Before saying yes to the next store credit card offered to you at a retail checkout counter, find out more about what that deal will mean for you in the long run. Those in-the-moment discounts may come at an unexpected price. There could be hidden drawbacks, and if you’re already struggling to pay off debt the last thing you need is more financial complications.
First, a breakdown of some useful pros and cons to consider:
Potential Upsides:
- Loyalty rewards: Frequent shoppers may earn valuable rewards for their purchases.
- Bonus offers: Like exclusive discounts, coupons, or special access to events.
- Promos: Zero percent interest for a set period.
- Easy approval: Available to those with poor or limited credit history.
Possible Downsides:
- High APRs: Expensive interest charges leading you to even more debt.
- Confusing or misleading terms: That zero percent interest might come with hefty charges if the balance isn’t paid off in full.
- Low credit limits: Might hurt your credit score if you carry a high balance.
- Unexpected restrictions: Not the flexibility you need from a card.
Store Credit Cards vs. Traditional Credit Cards
The biggest difference between store credit cards and regular credit cards lies in their rewards programs. Most regular credit cards offer rewards options like cash back, points, or miles. Your rewards aren’t usually limited to specific retailers, allowing you to earn benefits on everything from groceries to travel. But store credit cards are geared towards rewarding purchases made at the issuing retailer. Furthermore, redeeming those rewards often requires you to spend them with the retailer and buy things you don’t really need.
When Store Credit Cards May Be Worth It
Store credit cards can offer some valuable benefits in certain situations. Some store cards offer no-interest financing promotions, allowing you to spread the cost of a large purchase over a set period, provided you pay off the balance before the promotional period ends. For folks with lower credit scores or limited credit histories, store cards can also provide an opportunity to build credit more easily due to their more lenient approval criteria.
If you get one:
- Stick to a responsible repayment plan
- Always pay off the balance before any promotional period ends
- Avoid carrying a balance to prevent high-interest charges
- Be sure all purchases are manageable within your budget – especially the big ones!
Before applying, carefully review the card’s terms and decide if it aligns with your spending habits and financial goals. If you’re disciplined about paying off your balance, a store credit card can be a useful tool.
When to Avoid Getting a Store Credit Card
Do you really need the temptation of a card with an APR of 30% or more? Most Americans don’t need that added financial stress. Without careful management, the drawbacks may outweigh the benefits. Additionally, if you don’t pay off the balance in full, you could be charged deferred interest, which will be applied to the entire purchase amount. This can be a significant financial burden for the people who can least afford it.
Consider a Prepaid Debit Card (or Account) as an Alternative
A much safer alternative for someone who wants the convenience of using plastic without the financial risks is a prepaid debit card. Just stop by a Currency Exchange in your area, load some cash onto your new card, and you’re ready to start using it. In addition to a card, a Yes! Debit™ DDA (Demand Debit Account) will give you the benefits of a bank account without having to open one:
- A prepaid debit card you can use where VISAs are accepted
- An account that works like an online bank
- Add money to your card at CFSC locations for free
- Free monthly ATM withdrawals
- Rewards program for cash back offers
- Plus other features
Ask About the Benefits of Yes! Debit™ at CFSC Currency Exchanges
Prepaid Yes! Debit™ cards are just one of many reasons to visit your nearby CFSC Currency Exchange. We’re here for anyone who needs to replace a lost or stolen vehicle sticker, take care of other auto-related tasks, and handle any number of personal finance services in a flash.
Call or stop by your nearest CFSC location today!