Now that the holiday shopping season has wrapped up, you might find yourself with a few new department store credit cards in your wallet. While taking on more credit during a tough economy can be risky, there are some advantages to having a department store credit card.
Benefits of Department Store Credit Cards
Firstly, many department store cards offer discounts of 10 to 15 percent on your purchases. Some even provide no interest charges for a limited time, which is a big perk if you’re financing a large purchase. Plus, there are cash-back rewards, loyalty points, and presale offers that can make these cards appealing.
Margot Bai, Canadian author of “Spend Smarter, Save Bigger: Finding BIG savings in your Home, Mortgage, Vehicles, Insurance and Investments,” explains, “Department store cards entice consumers with promises of delaying payment interest-free, often longer than regular credit cards. For instance, store cards may give 60 or 90 days to pay or even longer for larger purchases. Additionally, store cards might have reward programs or offer bonus points on an existing reward program.”
However, to get the most out of a department store credit card, it’s important to follow some key guidelines.
Tips for Using Department Store Credit Cards Wisely
1. Assess Your Reasons
Think carefully about why you want a store card. “If you are looking to the store for credit because you have maxed out with other credit providers, this is a bad sign that you are over-using credit,” warns Bai. Adding more plastic to your debt load will only make things worse.
2. Choose the Right Store
“If you’re going to get a store card, choose one for a store that you already shop at regularly and that offers a suitable reward program,” says Bai. If the reward program doesn’t suit your needs, Bai suggests, “A better choice might be to choose a Visa or MasterCard tied to the reward program of your favorite store. This way, you can use the card anywhere while earning reward points for special purchases.”
3. Read the Fine Print
Unlike regular credit cards with interest rates ranging from 10 to 20 percent, department store credit card rates can soar up to 30 percent. “Each store has its own terms and conditions, which can vary widely. If you don’t fully understand those terms, you can end up paying huge amounts of interest,” Bai cautions. “For example, a card may offer an interest-free period of 90 days, as long as the balance is paid in full before the end. If you lose track of how much to pay or by when, you could end up paying interest back to the original purchase date at a high rate.”
4. Limit the Number of Cards
Signing up for too many credit cards can negatively affect your credit score. “Managing your debts effectively becomes harder with each additional credit card you own, since each card comes with a new bill to remember to pay on time,” Bai notes. She recommends limiting your plastic to a maximum of three credit cards.
Conclusion
While department store credit cards can offer great discounts and rewards, it’s crucial to use them wisely. Stick to one or two cards from stores you frequently shop at, understand the terms and conditions, and avoid accumulating too much debt. This way, you can enjoy the benefits without falling into financial pitfalls.
