These days almost every store you go to is going to want to offer you store credit cards and it’s hard to understand if they’re worth it. You’ve only got so much space in your wallet and additionally, you don’t want to be using a separate credit card for each transaction you make.
Oftentimes these types of cards provide you with a chance to earn rewards while you use the cards at designated stores. Sometimes those introductory offers seem too good to pass up. But your credit is important and you can’t just go around willy-nilly trying out every card.
So are they worth the hassle of trying to apply for them? We’ve dug into this whole phenomenon of store credit cards and we’ve got information you are going to want to know. You need to arm yourself before your next visit to a checkout so you can make the right decision. That’s up next.
How Do They Work?
Store credit cards are pretty much straightforward and in most cases get what you bargain for. They come in two forms, closed-loop and open-loop. And they all have their own set of advantages for having them.
Closed-loops are where you can only use the cards for purchases in the store where the card is issued. In some cases, rarely though, for stores that are owned by the same company. For open-loop cards, the scenario is quite the opposite.
Open-loop cards are the opposite in the sense that they can be used to make payments in different stores. They usually have a network payment logo on them such as MasterCard and Visa. They are not only for stores alone; they can be used at any merchant that accepts cards.
Pros & Cons
One of the pros that these cards come with is that you get a number of discounts from the stores that issue the cards. The other thing is that you get to earn major rewards with the cards as well. For example, one you have the store credit card, you are automatically entered into their rewards program.
And since any card that reports to credit bureaus can help you build your credit, you can use the store credit cards to build credit. The stores tend to partner with major banks and other credit-issuing facilities to offer you the credit. Open-loop cards are the ones that majorly partners with banks.
Cons – There are a number of cons including not being able to make purchases at other stores when you use these cards. These are mainly for the closed-loop cards. The other con is the interest rate charged by the cards –they are usually high for most cards.
The other con that you really need to look out for is the low-rewards rate. For most credit cards (not store cards), you are usually enticed by the high rewards program. Wirth store cards, the rewards are pretty much limited.
Rewards System
The rewards system comes with a bit of a challenge when it comes to the store’s credit cards. The program is usually attached to the store alone. For example, if you have a store card for a specific store, you can’t get rewards outside the store.
The rewards come in terms of gift cards and low prices. In most scenarios, you wouldn’t expect low prices to be part of rewards but that’s the best you can get with these cards.
Are They Worth the Fees?
For store cards what you have to deal with is the high-interest rates and fees that come with the card. The high interest that comes with the card makes it all the more difficult for you to revolve balance – it is expensive in the end if you dare try.
So, are they worth the fees? Yes and no are both the right answers. For example, if you use your card for grocery shopping, you can get a grocery store card and not feel the pinch. The number of discounts and rewards in the form of gift cards is worth the fees in the end.
But when you want to earn rewards other than from the store in which your card is associated, then the fees aren’t worth the card. How ever you look at it, it should fit your lifestyle when you want to apply for any store card.
Conclusion
You have to weigh your options before you apply for any card, and especially for a store card. They have their own set of advantages and pitfalls because you can often only use them with one retailer.
You’ve got a ton of choices when it comes to credit cards, it’s not so much that they accept you as you accept them. The choice is yours so do your research on the credit cards that best fits your lifestyle. If you shop at a store weekly it might be worth it.
Disclaimer: All credit products carry risk. Be aware of these risks by reading the associated terms and conditions.
