Consumer Credit Cards and Department Store Credit Cards

Many retail stores want to offer a line of credit. But before you sign up to get 10% discount for the purchase and a free umbrella, it is necessary to understand the effect that these may have on your credit cards - good and bad.

"If you apply for a {fill in the name of the store here} now credit card, you will receive a 15% discount on the purchase."

Oooh. Diehard shoppers who do not be tempted?

Lately it seems that every consumer purchase is preceded with an offer to apply for a credit card. Not MasterCard or Visa, but the cards issued with the name of a retail store on them for the exclusive use in that shop. JC Penney was one of the first retail stores to issue credit cards in 1958. Since then, commercial companies have recognized its operating profit to be made to credit cards, as well as the instant punch in the arm of their marketing efforts. You've heard the litany of the Gap, Kohl's, JC Penney, Dillard's, Target, Best Buy, Wal-Mart, Meijer, Banana Republic, The Sak, Nordstrom, Bloomingdales also, and the list goes on and on.

The marketing hook? Discounts for merchandise of the store along with other benefits.

As with most things there are pros and cons for consumers:

ProsDepartment store credit cards can be a good way to establish credit. The requirements for the card details are often less stringent than for major credit cards. Gerri Detweiler, founder of DebtConsolidationRX.com and author of "The Ultimate Guide to Credit," agrees. "A consumer is able to selectively establish a positive credit history with credit cards retail store, which usually have credit limits are lower and therefore easier to obtain." Special funding for the implementation of a detailed file helps sometimes the same score-as-cash deals for large purchases such as computers, home appliances and mobile, which allows you to pay small monthly installments without interest over a period - usually 6 or 12 months. Just be sure to pay the full amount before charging period without funding comes to an end, advises Detweiler. "If payment is not made in full by the same-as-cash at year end, borrowing costs will apply retroactively from the date of purchase." Special Events "savings" Beyond introductory discounts, events, special savings and sales only for holders of store credit cards, there are often awards programs where you earn points for every dollar spent on the credit card store, and then collect the points for, well, earnings.

ConsHigh APRS-flight. Interest rates for credit cards shopping stores are generally higher than credit cards, usually found resting in the upper teens. The benefits do not always outweigh the financial costs, so if you can not discipline to pay off the balance every month, credit cards retail stores are not for you! Lines of credit credit history affect the clerk tells you that if you open a line of credit today, you can get one year of free financing on that couch just bought! "Then, sign me up!" you say. Before you know it, you can have 15 open credit lines, often, these cards are only used once or twice to enjoy the benefits and you soon forget they had in the first place.

Detweiler said to be very selective when you apply for the card details: "Stick to one or two cards required during a period of 6-12 months Anything else is considered a risk factor on your credit report.».

It is a balancing act

So, now that you know the pros and cons, how do you tell if a retail store card is worth its weight? As always, you need to do some 'math.

Find out what the APR rate and add any fees or minimum purchases required for the card. Then compare that with the potential savings shop to make sure everything balances. Do you plan to spend more money than you would normally do to gain the benefits and discounts?

For example, a card may have a typical APR of 19.80%, no annual fee and no minimum purchase. The benefits include a 10% discount on first purchase in-store and 10% discount on first purchase online. You also get free shipping on all online purchases over $ 100. For every dollar that you spend in the store earns a point, when you earn 350 points, you will automatically receive a $ 15 reward card.

This is a nice set of incentives. This is also a lot of debts that you are putting on a credit card in the name of the discounted goods.

If this is a store that frequently make purchases and is expected to pay the credit card balance every month, you can enjoy these benefits in the clear. However, if you carry a balance on your card, do not even bother - because an APR of 19.80% $ 350 trumps a $ 15 reward card each time.

Making math is a lot to do when you're at the counter with a load of new purchases. But do not sign a paper without seeing the fine print and find out what you are signing for. You may remove part of the fun of shopping madness, but in the long run you'll be happier, because you are protecting your credit and the benefits of having good credit - can buy a new home, for example. These things will bring a smile along the way, will be more than 10% off that dress from the Gap hip - which will not be so stylish in a few months anyway ....