Credit Card Quick

Are Retailer Credit Card Rewards Worthy of Your Interest?

Credit Card Rewards

You know the holidays are upon us when retailers begin pulling out all the stops with their credit cards. Great deals for opening a retail credit card; great deals for using your retail credit card; and special bonuses, coupons and shopping events for being a cardholder are just a few of the things that retailers use to entice us into using a retail credit card.

However, are retail credit cards all they are really cracked up to be?

You may find it all a bit too tempting when you go to make a purchase and a store associate tells you that you can open a store credit card within minutes and save as much as 20 percent on your purchase. This is usually the time when you must make a decision regarding the advantages and disadvantages of owning a retail credit card.

Weighing a Discount vs. a High Interest Rate

If you know, unequivocally, that you will pay off your credit card purchase when your first statement comes then it may be worth your while to open a retail credit card account. However, if you even have the smallest inkling that you may not be able to pay the balance in full then you are probably better off passing on using a store credit card.

This is because retail credit cards come with notoriously high interest rates. In other words, any discount that you may have received for opening a new account will likely be erased the first time you are unable to pay your bill in full.

Too Much Temptation

Another factor to consider is your spending habits. Many times, individuals armed with retail credit cards are likely to spend more than if they were using another form of payment.

You may find yourself making more frequent purchases, purchasing more expensive items or simply purchasing more than you otherwise would have if you were paying with cash, for example.

Consider your Credit Score

Although a nice payment history on a store credit card may bode well for your credit score, missing even one payment may have a strong impact on your credit score, in a negative way. Plus, retail credit cards have lower credit limits, which may just not make much sense when you have a perfectly good major credit card with a low, fixed interest rate.

Retail Credit Cards: Should you Take the Bait?

Choosing Credit Card

We’ve all been there before: we walk through a store, spot an item that we feel we absolutely “must have,” then get lured in by a sales associate promising us a retail credit card in an instant, complete with an incentive. The question is: should we take the bait, or should we remain hesitant when it comes to retail credit cards?

Retail credit cards certainly have their share of advantages and disadvantages, so what might be right for one consumer may not be right for another.

Let’s compare the two:

Advantages of Retail Credit Cards

• Instant approval – There is nothing like being able to purchase items from your favorite retailer when they are able to approve you in just minutes.
• Instant discount – Many retailers offer customers additional incentives for applying for instant store credit by discounting the day’s purchases.
• Future coupons/discounts – Many retailers, in an attempt to lure their customers back into the store send them coupons in the mail, usually along with their statement.
• Special promotions/events for card holders – Another ploy of retailers to get their credit card holders back into the store is to offer card holder-only promotions and events.

Disadvantages of Retail Credit Cards

• High interest rates – It is important to realize that, along with the convenience, comes high interest rates. Over-the-limit fees and late-payment fees for retail credit cards can be quite high, as well.
• More credit – do you need it? – The real question when deciding upon a retail credit card is, “Do I really need another credit card?” For many consumers, a standard credit card with a low interest rate may be a much better option than opening yet another credit account.
• Impulse buys/overspending – Perhaps the biggest reason that many consumers avoid retail credit cards is that they often encourage impulse buying and overspending, Sometimes it is all a bit too tempting to walk into a retailer and buy more than we need, simply because we come armed with our store credit card. Consider whether you can make responsible purchases with a retail credit card before applying for one.