Benefits and Drawbacks of Department Store Credit Cards

Every time that you go to make a purchase at a department store, the cashier at the counter offers you the opportunity to sign up for their department store credit card. She tells you a lot of great things about department store credit cards. However, there’s a good reason that she’s pushing that card application on to you; it’s to the benefit of the department store if you get their card. This doesn’t mean that these type of cards are all bad but you should be aware that there are both benefits and drawbacks to them.  Here’s a small list of some of the benefits:

• Percentage back on the first purchase with the card. You will get discounts immediately upon getting approval for the credit card.

• Ongoing savings at that particular store. Loyal customers are rewarded with periodic discounts.

• These cards are easy to get. If you don’t have credit or you need to rebuild your credit then these cards can be a good way to do that (assuming that you are going to be capable of using them responsibly).

Drawbacks:

Here are some of the problems with department store credit cards:

• The interest rate on these cards tends to be very high. This means that you lose money unless you pay the card back in full every month.

• They can only be used at that store. They can’t be used like normal credit cards.

• It’s easy to get a lot of them. This can cause a hit to your credit report. It can also make it difficult for you to keep your bills organized and can therefore make it harder for you to be responsible with your finances.

Why Department Stores Want You to Get Their Credit Cards

You should be aware of the fact that department stores want you to get their credit cards because it is a benefit to them. If you have their credit card, you are more likely to shop with them. They will send you discount offers to entice you to come in to the store and spend more money there than you might if you didn’t have their credit card. This doesn’t mean that you don’t necessarily save money with the card but it can mean precisely that if you aren’t responsible about your spending when you have these cards.

Weighing the Pros and Cons

If you need one of these cards to help start rebuilding your credit, you shop at the store regularly and want savings or discounts from that particular store AND you simply know that you can be responsible with the card then you may find that department store credit cards are more good than bad. Otherwise be wary of them because they do have drawbacks that can get you.

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This entry was posted on Tuesday, July 29th, 2008 at 4:23 pm and is filed under Tips & Advice. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.