Opening a store card can be a good idea—if you’re careful

Store cards, or credit cards offered by a particular retailer, are rarely recommended by financial experts. The interest rates are higher than average, and consumers usually sign up for them to get a one-time discount on a specific purchase.

For the record, it is a terrible idea to sign up for a credit card just to save 10 or 20 percent on one purchase.

However, we’ve never taken a hard line against store cards, because they can play in important role in helping consumers establish credit. We were founded as CCCS of the Inland Empire nearly 40 years ago. Back then, we would advise emerging consumers to buy their first major appliance with store credit. It was a great way to establish one’s first credit account with a one-time purchase that most young families were going to make anyway.

These days, though, things have changed. We’re more than just CCCS-IE now, and stores don’t typically sell appliances on credit. Now, a retailer is likely to offer you a store credit card and let you buy your appliances with that.

Yes, store cards carry higher interest than other credit cards, but they’re also easier to get, which makes them ideal for someone who needs to build credit. (Another kind of “store card,” the gas card, has long been our first credit card of choice for young consumers.)

Another perk some retail stores offer is a permanent discount for shoppers who use their store card. If you pay off your balances before they incur interest charges, then using these store cards is a great idea. If you can buy all of your groceries, household items, and even some clothing under one roof, then saving an extra 5% by using that store’s credit card is a no-brainer.

Some stores will offer special interest-free deals. You’ll get a coupon in the mail offering six months or a year of no interest on a large purchase. That’s can be a great boon if your store card of choice is a hardware store’s, and you’re in the market for a new lawnmower.

Caveats

• Pick one. Applying for store cards at multiple retailers will hurt your credit score and leave you with lots of debt headaches. Only get one store card, and get it at the retailer you shop with most often.
• Keep your spending under control. Remember, store cards get more expensive than traditional cards if you carry a balance. Keep your spending under control and pay off the balances in full every month when using store cards.
• Remember, never use credit as a substitute for income. Let us repeat that: never use credit as a substitute for income. If times are tough, it can be tempting to sign up for a store credit card to help the family get necessities. This is a recipe for disaster. If you are tempted to take on debt you can’t afford just to get by, call us right away for free credit counseling and budget advice from a certified consumer credit counselor.

If you’ve established credit and have too many open accounts, check out our advice for choosing the best credit card to stick with.

For four decades, credit.org served as CCCS for the Inland Empire region of Southern California. As credit.org, we can help consumers from coast to coast. Get started today using our web site or call us toll free.

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