Store Credit Cards: When to Sign Up

Posted on 10/24/2012

Whether you're shopping for blue jeans or building supplies, chances are you can pay for it with a store credit card. If you're trying to get out of debt, signing up for store credit cards is probably not the way to go. But there are some circumstances when store credit cards can be a good idea.

You're Making a Major Purchase Many stores offer percentage discounts when you sign up for a new credit card. If you're making a major purchase-- like an appliance, mattress or TV-- this can add up to significant savings. If you're just buying a tee shirt or a pair of shoes it's probably not worth the hassle or the financial risk.

They're Offering Interest-Free Financing
Furniture stores and home improvement big box retailers often offer shoppers zero percent financing when they open a new store credit card. If you're facing a pricy emergency, like replacing your ancient hot water heater, this could be the ideal opportunity to take advantage of interest-free financing. Just make sure you pay off the item before the regular interest rate kicks in.

You're a Frequent Shopper
Certain stores offer continual discounts for shoppers who pay for purchases with a store credit card. For instance, at Target when you shop with your REDcard you earn 5 percent off purchases and free shipping online. Keep in mind that studies show cardholders actually end up spending far more than those who pay cash so that 5 percent discount may actually end up costing you.

The Card is Co-Branded
Some retailers offer cards that carry the American Express, Discover, MasterCard or Visa logo. That means those cards can be used at other stores and they may have better rewards programs. One example is the True Earnings Card from Costco and American Express. Cardholders earn 3 percent cash back at gas stations, 2 percent cash back on restaurant and travel purchases and one percent cash back on other purchases. Plus there's no annual fee with a paid Costco membership.

You Plan to Pay Monthly
There are definitely cons to store cards-- they can have high interest rates and low credit limits. But if you're responsible enough to pay off the balance each month, they can also offer a key to unlocking more savings.

By Alison Storm

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