The offer seems enticing.
A store offers you a huge discount if you sign up for a credit card.
It promises a full year of interest-free purchases, along withcardholder-exclusive perkslike coupons and receipt-free returns.
But youve also heard negative things about store credit cards.
So, are store credit cards good or bad?
Retailer-specific cards do come with a few benefits, but they also have some pitfalls.
According to Phillip Parker, founder ofCardPaymentOptions.com, stores have an incentive to talk you into signing up.
Stores push their credit cards because it helps them make more money, he explains.
Store credit cards also encourage people to shop more often and spend more in the store.
Before you agree to a store credit card, consider these pros and cons.
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That can bring some benefits, including the following.
VIP Discounts
Stores will promise the moon and stars to get you to sign up.
This often starts with a generous discount on your purchase that day, which motivates you to take action.
But because of the high interest rates and lower limits, they arent always the best option.
Credit-Building Opportunities
Having a tough time getting a credit card?
A store credit card could be the key.
you could even find store credit cards for bad credit.
Over time, this may improve your credit score.
However, in return for this, they can usually come with higher interest rates and lower availability.
But as Blank points out, these offers often come with a catch.
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remember the cons often outweigh the pros.
Being aware of them will help you scrutinize the fine print before you add another card to your wallet.
High Interest Rates
Ideally, youll pay off your credit card balances each month and skip interest altogether.
But with credit card debt hitting anall-time high, its clear that many consumers carry a balance.
Lower Credit Limits
Lower credit limits can get in the way of a shopping spree.
As Blank points out, this can make store credit cards more problematic than non-retailer cards.
Personal credit scores take into account the percentage usage of ones credit cards, Blank said.
Therefore, carrying a higher balance on a lower-limit card can have a more negative effect.
Potential to Overspend
Having a store credit card can encourage spending even when it isnt within your budget.
This is especially true when a retailer is sending you coupons and inviting you to exclusive sales.
If youre asking yourself, Are store credit cards good or bad?
its important to know their pitfalls.
You might be able to find a retailer card with reasonable terms.
Even so, it still wouldnt be the best way to build credit and stick to a budget.
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Stephanie Faris is a professional finance writer with more than a decade of experience.
