Pros and Cons Of Retail Store Branded Credit Cards
With the holiday season fast upon us, many of us have started our Christmas shopping already. It is hard to not notice the rather attractive credit card offers when cashing out at the register, such as saving 20 or 10% off if you apply for the store branded credit card. These offers are so attractive many people will jump right into it and fill out the application. Yet before applying for a store branded credit card, you should think carefully as every new account will effect your credit score.
For those with no credit or poor credit, store branded credit cards are often easy to obtain, yet they are also easier to lead you into debt as they tend to have higher interest rates. Store branded cards can also lead easily to debt, especially for younger people who many of these cards are aimed at within shopping malls. Yet these cards can help young people and those who are rebuilding their credit to rebuild their credit history. Store branded credit cards tend to be more lenient when it comes to a customers credit history, and they make up for their losses and charge offs by making the interest higher across the board. Retail credit cards also tend to have less fees than so called fee harvester cards that people new to credit or poor credit often obtain. The key to rebuilding your credit with a store branded credit card is to not carry a high balance due to the higher interest rates on these cards. Store branded credit cards tend to have APR’s of 20 percent or more. Co-branded store cards offer varying APRs in a wide range suited towards ones credit score, while private-label cards tend to have a flat rate APR no matter what credit score you have. One has to be careful to avoid the temptation to over spend on store branded credit cards, even though store branded credit cards tend to have a credit limit no higher than $1000 it is rather easy to max one of these cards out. On top of high interest and a maxed out credit card, your credit utilization will go up, which makes up a large chunk of your credit score. You want to keep your credit balances at or below 30% of your total credit to avoid hurting your credit score.
If however your credit utilization is low and you have not opened to many recent accounts one or two store branded credit cards can go a long way towards lowering your holiday expenses provided that you choose the right offer. Good store branded credit cards will have perks such as promotions and discounts on merchandise. Some stores will offer you discounts throughout the year provided that you use the card on those purchases, so some store branded credit cards really do carry a lot of value if you happen to shop at that store often. Some stores offer other perks as well, Macy’s for example will allow you to return merchandise without a receipt, provided you bought it on your Macy’s card. Some store branded credit cards even offer cash back such as Nordstrom’s credit card which rewards its cardholders with $20 for every 2,000 rewards points earned. Some store branded rewards are just as good as regular credit card rewards programs, for example the Sears Gold MasterCard offers points for every purchase, which you can redeem for a round-trip airline ticket. The TrueEarnings Card from Costco which is an American Express co-branded credit card offers pure cash back for it’s rewards. Other perks can include things such as free gift wrapping which certainly comes in handy during the holiday season.
If you are capable of paying off the balance every single month in full then a store branded card can help you offset the holiday expenses, but if you like many Americans tend to have a revolving balance from month to month try and avoid these store branded credit cards unless they are Co-branded with a major credit card company and offer more attractive interest rates.