As the holiday shopping season approaches, many customers will be considering the benefits of applying for a store line of credit versus a new or existing credit card. Many retailers attempt to lure customers with promises of cost savings, loyalty rewards, and associated benefits with store credit cards. Consider that a typical store credit card could save you some 10%+ on your purchases from that specific store. Store credit cards are designed to make a particular retailer’s products and services more appealing to you by offering deep discounts and store-wide credits and perks to dissuade you from going elsewhere.
You may receive something like a 15% discount on top of an additional 10% discount for signing up for a store credit card. While appealing, many customers may prefer the non-specific nature of Visa, MasterCard, American Express, Discover or other credit cards. This begs the question: Should you opt for a store credit card or a conventional credit card when conducting your daily, weekly, and monthly shopping activity?
What do the Pros Suggest?
Before we get to the answer, it’s important to hear what the experts have to say about this topic. One of the industry leading authorities on all forms of credit, CreditLoan.com advises customers to consider the pros and cons of each option:
‘The first order of business is to evaluate the merits of a store card versus a credit card. Be advised that store credit cards are only applicable to that store, or that brand. They cannot be used anywhere else, thereby limiting you in terms of choice, price, and availability. You may be offered a fantastic deal with Kohls, Macy’s, Best Buy, or any other retailer, but do you always want to shop at that store?
Credit cards offer greater variety – they are more versatile. You can use them anywhere at any merchant, at any time. Plus, you get many additional benefits with credit cards such as cash back, points, discounts from certain stores from your credit card company and so forth. Your spending limit on a credit card is typically higher than your spending limit on a store card. Provided your credit score is adequate, you will qualify for a credit card. It’s important to evaluate all your options before you pick one or the other.’
What is The Better Way to Shop?
The case study about which option to choose – store cards or credit cards needs to examine individual preferences, habits, and credit profiles. For example, if you conduct a lot of your purchasing activity at a retailer such as Walmart, Target, or Sam’s Club, it may benefit you to use a store credit card specific at that retailer. There is a catch however: store credit cards come at much higher interest rates than your 0% APR credit card for 12 months or 18 months, or your low APR credit card. The interest rate routinely runs above 20%, meaning that retailers are on a good wicket when they issue store credit cards to their clientele.
An interesting case study was presented by the aforesaid credit experts (Creditloan.com) where it was found that a typical purchase at Target valued at $213.97 would be subject to a 23.1% APR, a late payment fee of up to $37, and a return payment fee of up to $27. If a client misses a single payment and doesn’t purchase anything else on the card, the balance will rise to $255.04. This is something to bear in mind, given that the interest is $4.07. If you pay the balance in full, your best bet is a store credit card. Since store credit cards are easier to be approved for than conventional credit cards, you must factor in the higher interest rates.
The Bottom Line
If your income is inconsistent, you are better off with a regular credit card. Much the same is true if you’re looking for reward points from a credit card that offers you benefits across the board. These are but a few of the many pros and cons of store credit cards versus conventional credit cards. Remember that any line of credit has the ability to adversely affect your credit profile. Unfortunately, store credit cards have a greater propensity to damage your credit profile than typical credit cards. Overall, regular credit cards are your best bet since they have wider coverage and better general benefits than store credit cards.