A store credit card is a type of revolving charge account that is offered and operated by a retailer, and can only be used for credit purchases at locations owned by that retailer. Unlike other types of credit cards, a department store credit card is subject to the credit policies and procedures of the retail chain involved. While cards of this type can be helpful in some situations, there are also potential drawbacks that should be considered before opening this type of credit account.
One of the chief benefits of a store credit card is that customers using this type of credit account sometimes receive additional discounts not available to patrons who use bank credit cards or pay cash for purchases. This can sometimes greatly reduce the purchase price of an item, since the discount may apply even when the item purchased is already marked down as part of a sale. When this is the case, using the store credit card for the purchase is often a good approach, especially if the balance of the purchase is paid off before any interest can accrue on the account.
Another benefit is that cards of this type are often easier to obtain than bank credit cards. For people who are attempting to rebuild a damaged credit record, securing a card issued by a retailer can be a good way to slowly build up a positive reference on credit reports. As long as the card is used responsibly, there is a good chance that over time the opportunity to secure other more flexible credit accounts will come to pass.
While there are benefits to acquiring a store credit card, there are also potential liabilities to consider. In many instances, the credit check done before these cards are issued results in what is known as a hard inquiry on the credit reports, a situation that can have an adverse effect on credit ratings. In addition, the cards can only be used at locations owned by the issuing retailer, which limits the range of shopping opportunities.
Another of the more common store card dangers has to do with the rate of interest charged on the open balances of the accounts. With a store credit card, the rate of interest is usually higher than with bank credit cards, including high-risk credit card accounts offered through banks or other financial institutions. In order to minimize this potential liability, make it a point to pay off the balances on the store cards as quickly as possible.
