NDSU Extension Service - Ramsey County

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Use Our Credit Card!

Use Our Credit Card!

 

                We’ve all had it happen – you are checking out at a large department store and the clerk offers you an extra discount on top of the great sales you’ve already found if you only take a few moments to open a credit card with their store.  And in an amazingly short time, you have your discount and a new line of credit.  Sounds like a great opportunity, right?  Maybe yes and maybe no.

Store credit cards often feature great rewards.  For example, some give their cardholders 5 percent off every purchase. Some retailer cards offer special sales that are available only to cardholders, no-receipt returns, free shipping, and offers of zero-interest financing. You might even get a cash bonus of $20 to $30 just for signing up for the card.

                The downside is often the interest rates charged which may be double what you'd pay with traditional credit cards, and opening too many accounts at once could tarnish your credit score. Here are some tips to find store cards that will pay off for you.

Get the right type - Retailers offer a confusing array of card options. Many offer co-branded credit cards bearing an American Express, MasterCard, or Visa logo, which can be used anywhere those cards are accepted. You'll earn points on all your purchases with the card, not just at the store that issues it. Another type is a store charge card, which can be used only at the issuing retailer.

Another type of store credit card can be used only to finance a big purchase. These cards are issued by electronics or home-improvement stores and most offer six months to a year of zero-percent financing, though some stretch it out even longer. These cards can save you quite a bit if you need to spread out payments on a big purchase. Be aware though, if you don't pay off the balance in full by the end of that period, you'll be charged interest retroactively to the date of purchase.

Guard your credit- Avoid opening several credit-card accounts at once because it could cause your credit score to drop. And since some store cards have very low monthly credit limits, you might end up charging close to the limit. That will increase your debt-to-available credit, which can also lower your score.

Check the interest rate - The average bank credit card has an interest rate of about 14 percent, but cards from big box stores can have interest rates of about 25 percent with some up to 29 and 30 percent. That initial discount on your purchases will disappear quickly if you miss one payment deadline!

Know the rewards offered - Make sure you read the terms of your card agreement and rules regarding the rewards (including whether your points expire) before you sign up for a store card.  If you don't spend a lot of money in a particular store every year, you might find that you don't earn much in rewards.  The perks vary from card to card.  Some department stores allow you to receive free amenities when you use your card to buy things online or from a magazine. Services such as shipping and handling and/or free gifts sometimes come with your purchases when you buy an item from a store with its credit card.

As a smart consumer, you will want to do your homework and research the positives and negatives before being pressured into applying for a store credit card, especially at a store where you rarely shop.

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