Although it always pays to thoroughly examine the terms and conditions of a store credit card, including the interest rate and related fees, there are ways to make a store credit card work for you.

In other words, although your favorite store credit card boasts an interest rate high enough to make you break out into a cold sweat, you may actually be able to beat the store at its own game. Here’s how:

• Pay off your balance each and every month, without fail. Using a store credit card can be quite convenient – that is, until you begin paying steep finance charges on your balance. You can avoid paying any fees or finance charges by simply paying off your store credit card before the due date each month.
• Take advantage of the store card’s initial discount. If the store offers you an attractive discount just by opening the account, by all means take advantage of it. However, once again, it is important to pay off your balance when the bill arrives. After all, paying interest on your purchase will likely negate any benefits you received from your initial discount.
• Take advantage of the member benefits of the card. Carefully read any correspondence you receive from your store so you know when to shop. Most store credit cards come with special discounts, coupons and shopping days for card members, so remember to pay attention to these offers so you can save the most money.
• Be aware of your shopping habits. If you tend to spend more because you have a store credit card in your back pocket, it may make more sense to pass on using a store credit card. It may also pay to shop first without your credit card and then return with your credit card once you have given some thought to what you need and what you can afford.

Well, unfortunately, along with the goodies come high interest rates – often, astronomically high interest rates. So, the question is: can we enjoy store credit cards without getting burned by their high interest rates and fees?

Here are our tips and tricks to making store credit cards your friend, and not your enemy!

• Resist impulsively opening a store credit card on the spot – If you didn’t leave the house with the intention of opening a store credit card then it is best to avoid doing so once you hit the store. Instead, consider whether the store credit card is right for you and take the terms and conditions of the card home with you to study before making your decision.
• Consider the benefits of the card – not just now, but in the future, as well. The best store credit cards are those that will offer you continuing benefits for being a card holder. In other words, if the only discount they are willing to throw your way is the moment your open the credit card, you are probably better off passing on the card.
• Make it your priority to pay off your card, in full, each and every month as to avoid interest charges – We have yet to find a store credit card with a competitive interest rate, so the best way to handle any store credit card, regardless of where it is from, is to pay if off when the bill arrives. If you can’t afford to pay off the card in one month’s time, don’t use it and opt instead for using your competitive major credit card instead.
• Use your credit card for an interest-free, short-term loan – Many store credit cards, particularly for places where you make large purchases, such as electronics stores and home improvement centers, often offer interest-free periods for large purchases. Take advantage of these offers, just make sure you pay them off during the interest-free period; otherwise, you could end up paying all of the deferred interest charges, which could be significant.

But is your store credit card really all it’s cracked up to be?

Many of us take out store credit cards because it is an easy way to get the best coupons and deals. After all, retailers generally reserve their best offers to their credit card holders.

However, your beloved store credit card may be costing you – even if you’re not aware of it.

Here are some factors you may want to consider next time you pull your favorite store credit card out of your wallet:

• Interest rate – Store credit cards are notorious for their high interest rates. In fact, store credit cards feature some of the highest interest rates around – often anywhere from 18 to 23 percent. Before using your store credit card, do your homework and see what kind of interest rate is attached to your credit card.
• Deferred interest – Many store credit cards offer special promotions with deferred interest – particularly on larger purchases. Although this may sound like a great deal at first glance, consider the downside to this type of offer. In particular, it is quite common for a retailer to tack on all the interest that was originally deferred if you fail to pay off the purchase during the promotional period. In other words, your deferred interest charges could end up costing you big in the end. Pay close attention to any deferred interest or deferred payment promotions and always make every effort to pay off these purchases before the promotional period ends.
• Coupons and special promotions – are they worth it? – One of the best reasons to own a store credit card is the coupons and perks that go along with it. However, if you fail to pay off your purchase in full before the end of the billing cycle, the amount you will pay in interest charges will almost certainly negate any savings you enjoyed. In other words, don’t count on saving any money unless you are prepared to pay off the account in full.

Store credit cards are often discredited by financial experts because of their sky-high interest rates. However, if you are a financially responsible credit card user, they may very well provide you with some benefits.

The Lure of Discounts and Rewards

Stores will often reward customers with frequent discounts and rewards for using their store credit cards. This, of course, can prove to be quite beneficial, particularly for retailers you frequent. However, it is important to understand that if you fail to pay your card in full each month you could very well lose all of the advantages of discounts and coupons due to finance charges.

One of the downsides to store credit cards, besides their high interest rates, is that many individuals tend to spend more at their favorite retailer when they come armed with a store credit card. In fact, retailers are counting on it.

If you find yourself purchasing more than you normally would if you were paying cash, or if you find that you are not using good judgment when it comes to purchasing items that are too expensive for your budget, then you should reconsider using a store credit card.

Controlling your Spending and Keeping your Spending Habits in Check

Many times, store credit cards give us the false impression of having more money. Many individuals, armed with a store credit card, will shop to excess. High store credit card balances, of course, lead to credit problems, particularly if they are unable to pay off the balance in full each month.

Like any other type of financial tool, it is best to examine your credit card spending habits before agreeing to open a store credit card. If you are confident that you can pay off your balance, each month, in full, then it may be a good idea to use a store credit card, particularly one that comes with discounts, rewards or other shopping perks.

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 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.