As the holiday season approaches, store credit cards get all the more popular with shoppers. Store credit cards can provide an additional line of credit for those who have big holiday shopping lists.

Whether it is a card from their go-to store, or just from a place where they are making a large purchase, many people choose to open store-specific credit cards. Although these cards often offer exclusive perks to cardholders, they often also come with their fair share of drawbacks. 

That is the reason, in this article, we share both the good as well as the not so good about store credit cards so that you know exactly what to expect with them. If you are thinking about opening one of these accounts, continue reading below.

Store Credit Cards
There is an absolutely mind-boggling array of Store Credit Card choices out there! Image source:

Store Credit Cards are Exclusive to Issuing Stores

Store credit cards are often exclusive to the issuing stores such that they work only when you use them at the store which issued them; they may not work elsewhere.

Yet, there are plenty of exceptions to this rule. Depending on whether your card is a Visa or MasterCard for example, it may well be accepted at all places where such cards are accepted.

The point is, this exception factor could possibly limit your use of store credit cards. At the same time, when you use your card at the issuing store’s outlets, you are quite likely to get the best deals on your purchases. This includes exclusive discounts, offered upfront when you confirm you are paying with the store card in question.

Relatively Easy to Obtain

A big advantage of store credit cards is the fact that they are relatively easy to obtain. For instance, stores take a far more lenient stance on credit scores when issuing these cards.

Therefore, even if you have a rather poor credit score, your chances of being granted a store credit card are reasonably high. An upside to this is the fact that you can use store credit cards to build credit. You can improve your credit score by paying your credit card bills on time and ideally in full, at the end of each billing cycle.

As you continue doing so, your chances of being granted a “regular” credit card increase incrementally.

Low Credit Limit

Now, a somewhat obvious downside to the fact that these cards are issued easily, is that they come with low credit limits. In many cases, those limits may just be enough for a single outing of reasonable shopping at the requisite store.

But again, you need to look at the fact that these cards are issued with minimal fuss, even to those with relatively poor credit scores. Stores need to minimize their risk, which they do by keeping credit limits low.

As you shop and pay off your credit card bills in a disciplined manner, there a chance that your credit limit will be increased.

High APR

While this may not apply to every store card, many of these credit cards do come with a high Annual Percentage Rate (APR). You do need to take this into consideration before splurging on the store card given to you. This is especially when you are unsure of being able to repay back the full amount when it is due.

Talking specifically, we have frequently seen the APR on store credit cards to be around the 21% mark, when the typical APRs on “regular” credit cards is around 17%.

If you end up shopping a lot – perhaps maxing out the credit limit available on your store card, and are then unable to repay in full, you will have to shell out a pretty penny in interest charges.

Possibility of No-Interest Financing Terms

Some stores offer special financing terms on the credit cards they issue, which include the possibility of no interest being charged for a specified duration. To give you an example, for the first six months for which you hold the card and make purchases of qualifying amounts, you may not be charged any interest, even if you do not pay the entire outstanding amount each billing cycle.

As long as minimum amounts are being paid, you could possibly not be charged any interest at all. In some cases, this condition too may not be applied. Yes, you will still only be able to make purchases that fit within your credit limit; no store will offer any leeway on this aspect.

The important point to bear in mind is that stores can and do offer special financing terms on the credit cards they issue. Remember though that this is not guaranteed with every store card, so you must check with the issuing store if it has any special financing terms such that no interest is charged for a specified duration.

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Clearly, store credit cards have their pros and cons. You need to evaluate your benefits based on your own unique situation and decide if it is a better option than a traditional credit card. If you open one of these card accounts, it is important that you know how to use it to your best advantage.