Are Store Credit Cards Really Worth It?

It seems like every store is offering a credit card now-a-days. You can no longer shop and not be asked to open up a store card and get a discount when you’re approved. Some of these deals sound pretty good. If you open up the card online, you might even get free shipping along with your discount. If it’s a really good card, you might be offered cash back.

But you might be wondering if the card and discount is really worth getting a new credit card? As with most things that deal with personal finance, “It depends.” One thing I can tell you now is that before you say yes, you should read the fine print and consider all the savings and costs involved. It’s also important to be honest with yourself about your shopping habits.

Ask yourself these questions when reviewing a store credit card offer:

How much am I really saving?

There are different ways that a card provides benefits.

• Percentage off. Some cards might offer 5% off all purchases. That might sound good, especially if they off that deal at the time of purchase, but it could be a waste if you barely shop at that store. You should calculate what your savings would be based on how much you’ve spent at that store within the past few months to a year. 

• Free shipping online. Many of these brick and mortars have online stores and will ship to your home. If you have a credit card with them, they may offer you free shipping. Be sure to understand if all purchases are free shipping or is it just orders over a certain amount. Read the fine print.

• Cash back on purchases. When reading the terms of the card, understand what purchases are included in the cash back. Are all purchases included? How much are you planning to use on the card and how much will you really get back?

What are the limits?

You won’t know the actual credit limit without applying and getting approved, but you can know what the limits are for your rewards. You should know:

• What’s the limit on your cash back rewards? 

• Are discounts only for a certain amount of time? Many credit cards offer perks, but some of them put a limit on them, ensure you know those limits.

What is the interest rate?

You won’t know your exact interest rate, but card companies can provide you with a range before you actually apply. Some cards even have a 0% interest for a certain amount of months. This is called an introductory rate. You should always know how long the introductory rate is good for. 

• This is one of the ways credit card companies make money. On interest rate fees. If your interest rate is 20% and you do not pay off the card in full each month, they get 20% of the balance, while you only got 3% of a discount.

What is the annual fee? Most of the store cards I’ve seen do not have an annual fee. However, you may think that there is no annual fee, but it could always be free for the first year. Find out if there is an annual fee before you sign up. If there is an annual fee, calculate how that stands up against your expected savings? For someone who may not use the card often, if there is an annual fee, you’ll find that it probably won’t be worth the money you’re saving.

What are the other fees? Credit cards have a bunch of other fees you may not know exist. I once had a credit card that charged me a fee for returned mail. Yes!!! I moved and didn’t update my address, and because they got my statement returned, they charged me a fee. I am not joking with you. Always find out what the other fees are for the card. One common fee is a late fee. How much will they charge you if you pay late? You may also want to ask if  there is a penalty for exceeding your credit limit?

Hello, World!

Use these questions and do the math to figure out if the card is worth it. You’ll notice that it may take a little more time for you to come up with your decision rather than just saying yes to the cashier when checking out. Never feel overwhelmed or pressured to get a store card. “NO” or “Not right now” works just fine as an answer. 

Once you have all the facts, you’ll be able to make an informed decision. Everyone’s answer will be different because it depends on the details of the offer, your needs, and your shopping tendencies.

In general, if you will use the card frequently, the annual fee is low, and you pay off your balance in full each month, the card can be a good idea. 

It’s important to remember that credit cards are notorious for offering a great deal for new customers, only to reduce the rewards, increase the interest rate, and increase the annual fee. Be sure to read the small print before signing up.

Store credit cards can offer impressive perks and an excellent opportunity to improve your credit. But these cards usually have very high interest rates. Be sure you’re getting a card that will improve your financial situation, rather than cause financial challenges.