What You Should Know About Store Credit Cards

It might be tempting to open a store-only credit card, especially when you’re about to make a big purchase and retailers offer big discounts to open an account on the spot. The problem is, that card you may only use a few times per year might hurt your credit score enough to outweigh a 15% discount on a new suit. These problems will persist even if retailers are forced to verify customers’ income before issuing them cards.

The New York Times featured the potential pitfalls of store-brand credit cards, especially for consumers with little or damaged credit. The main problem? A new credit account will lower the average age of your credit accounts, lowering your score. Store cards also tend to have low limits–only a few hundred dollars–and a few purchases will use up much of your limit, hurting your credit utilization ratio and thus your credit score.

Oh, yeah, and that 0% financing thing requires careful attention.

There are other reasons to read the fine print before getting these cards. Some retailers offer promotions where you do not pay interest for a certain period, as long as you pay off the balance by the time the promotional period ends. But if you do not pay off the balance, you will owe interest on your average balance during the promotional period — but interest will accrue starting on the date you bought the item. So if you bought a $1,000 television and you have paid off $800 by the end of the promotional period, you will still owe interest on your average balance, dating back to the day you bought the TV.

The Lure of Store Credit Cards, and the Hook [New York Times]


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  1. KixStar says:

    I have a Kohl’s credit card, and I only use it when I happen to need something AND it’s during a “credit card holders only” promotional period of certain percentages off. Then I go home and immediately pay it off. Seems to work pretty well.

    • Snakeophelia says:

      If you’re going to shop at Kohl’s, the card is worth it, because you get way more coupons and sale offers that way. My Sears card is useful for the same reason, since I regularly get coupons for $10 – $50 off, and I pay the card off in full each month.

    • Snakeophelia says:

      If you’re going to shop at Kohl’s, the card is worth it, because you get way more coupons and sale offers that way. My Sears card is useful for the same reason, since I regularly get coupons for $10 – $50 off, and I pay the card off in full each month.

    • ElizabethD says:

      Oh, me too. Well, this time of year I don’t always pay off the whole thing; but I pay way more than the minimum payment and get it squared away in a few months. Today I got 15% off sale prices due to my card, then I got $30 in free Kohl’s bucks which I will use toward buying myself the perfume I’ve been craving (Dana Buchman, love her stuff) and have Santa put it in my stocking.

      Kohl’s is great for basics: jeans, khakis, tees, athletic wear, bras, socks. And some of their newer designer apparel lines (Vera Wang, Dana Buchman, Elle) are really nice.

    • kelbear says:

      Kohls credit card has been working great for me as well. It gets me nice fat discounts and additional coupons, and I just pay it off as soon as I get home.

      2 weeks ago I got a 30% off entire purchase coupon in the mail. That went on top of the store-wide 15% off sale. Plus the $10 kohls cash for every $50 spent! Bought a bunch of electric shavers/toothbrushes as christmas gifts and used the kohls cash the next day(all discounts still in effect) and applied it to an electric mixer.

  2. HawkWolf says:

    That 0% financing thing doesn’t _always_ work that way. My partner got a Firestone card in order to pay for an expensive auto repair, since it has a 0% for 90 day thing and also a discount on the tires he bought at the same time. The 0% was for 90 days (3 billing cycles) and at the end of the 90 days, you paid interest on what was left of the balance starting at the 90 day mark. Really. So, well, I guess the moral is to still read the fine print :) It might actually be in your favor.

    • TouchMyMonkey says:

      And supposedly the Firestone card has decent promotions associated with it. We’ll see.

      • Alessar says:

        I think that Firestone actually owns their own store credit card. The majority of store charge cards are now owned by third parties, in fact there’s one company that owns a whole lot of them….

  3. chiieddy says:

    But again, if you pay the 0% off before the end of the payment period, it can help with large purchases you may not be able to afford right away, like a new refrigerator and washer/dryer set from Best Buy (I know but it worked well for us). I take full advantage of those offers and ALWAYS pay them off.

  4. Oregon says:

    I have seen and read here that even those with perfect payment records, a great debt to equity ratio are denied credit or have their amount of available credit greatly reduce for no apparent reason. My Credit score turns out to mean nothing in this day and age. Once you have purchased your home (and are not looking for a short term flip) does your credit score really matter? Saving a percent of interest on a home is a great reason to have a good credit score. I have weaned myself off of using credit cards for making most purchases and once I did this the amount of real cash I have left at the end of the month has been great. Having cash to buy items beats a good credit score in my book.

  5. wcnghj says:

    Store cards are useless in my mind. Just get a good rewards card and pay in full each month.

    • jesusofcool says:

      Well, that’s a great option if you can get a great rewards card, but lots of people with limited or poor credit aren’t eligible. For students or younger individuals with limited credit, rewards cards can be especially difficult to get. IMO, store cards can actually be useful in this case. They have a low maximum balance, which reduces the risk of going way beyond your limit if you’re new to credit cards, they’re relatively easy to obtain but still help you build credit and they offer more rewards than a bottom level bank card that gets you nothing if you get one from a place where you frequently shop. Sorry to sound like a shill for store cards, I’m just speaking from personal experience as a recent graduate.

    • NeverLetMeDown says:

      Well, they can be useful for the one-time “open a card and get a discount.” If you don’t mind the impact on your credit, that can be real money.

  6. cheezedawg says:

    The goal is not to have a high credit score. Your credit score is a means to an end. It does you no good if you never use it.

    • dragonfire81 says:

      Right but it’s nice to have it there if you ever NEED to use it. You never know what life can throw at you. Good credit can come in handy in many, many different circumstances. Keeping your credit score up is just a smart move.

  7. CumaeanSibyl says:

    I have an Old Navy Visa that occasionally runs double-points promotions when you use it outside the store. I swap it for my regular card during those periods and rack up the points, then pay it off in full as normal. Do other cards do deals like that?

    About 75% of our clothes come from Old Navy, so it was a no-brainer. Otherwise, I wouldn’t have gotten the card. It’s really only worthwhile for a place where you do a lot of shopping.

    (Note to self: look into Meijer card.)

  8. Japheaux says:

    My wife has a Kohl’s card and we also pay it off immediately after using it (online bill pay). However, my wife is caught up in the Kohl’s ‘quality’ image and loves the 15% savings. But recently we purchased a lot of stuff that was available at Wal-Mart, but my wife invoked the 15% rule and the ‘grab-a-coupon-at-the-register’ scam that allowed Kohl’s charge card holders an additional discount. He’s my point, even after the initial 15% savings using the card, and an additional 20% savings, the stuff we bought was still cheaper at Wal-Mart (yes, the same brand and models). Holy cow, don’t fall into that trap of discounts, savings, and sales…SHOP AROUND!

  9. grumpymo says:

    Always read the fine print carefully, many years ago we used a card with a home store for a major purchase, paid it off in full two months before the grace period expired, but because we didn’t comply with the mouse print on paying off the amount in full, got nailed for the full interest.

    The mouse print involved sending any payments in full to a different address then the one listed on the regular statement with a letter of some sort. Not complying with those instructions left them free to charge us the accrued interest.

    Definately a borrower beware situation.

  10. LSAX says:

    Eh, I’m 23 and I have a Banana Republic card, a Macys card, a Victoria’s Secret card, and a Saks card in addition to two regular cards. I pay them off every month if I buy anything, and am not looking to buy a house for at least 5 years, so it shouldn’t matter, right? I opened them to get discounts and promotions.

  11. HannahK says:

    The problem that I have with this article is that it assumes that you will be carrying a balance from month to month. All of these drawbacks go away if you pay the balance each month. Some people genuinely think that having a credit card means paying interest and only making the minimum payment, even if they could afford to pay more. Articles like this further the idea that it’s not possible to get the benefits of a credit card without any of the drawbacks.

  12. timotab says:

    If there’s a promotional offer for signing up for a card, and you don’t want to sign up, ask for the promotional amount anyway. I’ve told stores I don’t believe in using credit, but that I’d like the discount anyway, and more often than not, they give it. Try it.

  13. friedduck says:

    I signed up for a Macy’s card, but the terms were so bad I canceled after using it a single time. That, and it was one of those cards that if you didn’t send the payment the moment the bill arrived you were past due. Even canceling was a nighmare. The 800 number said I had to do it at the store, and the store insisted I had to call the 800 number. I finally got it canceled, and I’ve stopped shopping at Macy’s as a result of the experience.

    Nordstrom has proven to be a better place to shop.

  14. CTAUGUST says:

    Can we retitled this story “What You Should Know About Store Credit Cards… If You Are Not Very Bright.” ??

    I have a high FICO score and do have a couple store credit cards that are used ONLY for card holder only promotions and are paid off immediately. That is not how the stores want you to use the cards (they want the interest income) but if you are smart you use them only to get deals not available elsewhere.

    I have saved a alot of interest by using “no interest for X months” promotions instead of my own cash (ie: free loan) and just got a 40% off coupon yesterday for “card holders only” from another retailer I have a card with. Now my gifts from that merchant will cost less than planned.

    Sure, if you open lots of these cards, forget to pay the minimum due or ring up a big balance you are a fool and should not open such accounts. If you are an education consumer, you can do well.

  15. sponica says:

    The only store card I have is a VS Angels card. And every year around Christmas time they up my limit as a present to me. I think it’s at 800 dollars or 1000. While VS IS expensive, I’d have to buy a month’s worth of bras to max out the card. I really only use it this time of year anyway.

  16. banmojo says:

    If THIS Is what’s gonna wreck my credit, maybe I haven’t been taking care of my credit very well, eh? Once a year I’ll sign up to get the 15-20% off my purchase, then after a few weeks I’ll cancel the card. Works like a charm, every time. Have NEVER had a problem with my credit. I pay off my cards each and every month, my mortgage is something I RESEARCHED FOR ABOUT 2 WEEKS BEFORE BUYING so I know I can always make the payments, plus I bought insurance in case I lose my job so I’m good either way. Some of us actually take care of our OWN biznit right, and DON’T HAVE TO RELY ON UNCLE SAM TO BAIL US OUT.

  17. Yeah Right says:

    Macy’s Store credit card which combines with a visa card is a mess. When I cancelled my card a few years ago they had separate bills that would arrive, one for the visa and one for the store card. They were also due on different days. I paid the wrong bill. It was for $50, two weeks after I paid the wrong bill Macy’s started calling my house, every day, to have me contact their collections office. I would occasionally misplace a bill and pay it a few days late. This was the first time that I had missed the payment by more than two weeks, though I thought I had paid it. When I did call collections it was an office in India. I was so annoyed by the service Macy’s provided after I had been a customer for more than a decade I cancelled my card and have not shopped in a Macy’s since.

    • girl_scientist says:

      Oh god yes. I had a Macy’s Visa/store card for a few months, and it was a disaster.I don’t know why they separate out the two, but I ended up paying the wrong one and had to go through customer service to get the payment credited to the right account. Also, I had opened the account to get a discount on a wool coat, and after one month of wearing the coat all the buttons fell off the coat and had to be sewn back on. I contacted the store and they said to bring the coat back in. So not worth the trip.

      Never shopping there again!

  18. hendry70 says:

    Any new account dings your score initially, not just store cards. As the account ages your scores will improve. For those with thin files, adding a store card and paying on time could help your scores markedly.

  19. quail says:

    A note on the Kohl’s credit card: lots of people use the card in order to use the card hold only discounts. Once they make the purchase they write a check for the amount of the total bill and pay their credit card balance while they’re standing at the register. And a few months ago they allowed you to pay $50 or 1/3 of your balance, whichever amount was the highest, and you wouldn’t have to pay their interest. This policy was changed. In October new people getting card stopped having that as an option, and at some point in 2010 the option will be gone for everyone.

    But still, as department credit cards go they aren’t that bad if you don’t mind the game playing with the pricing.

  20. SugarMag says:

    I have store cards opened in the 90s when my credit was bad and I was a poor spender.
    I’m either too lazy to close or I dont want to lose the now good history. I dont do a balance – the itnerest is like 23%, even if you have great credit. My limit on my oldest store card is $3500.

    If the details are different than the article is it OK to keep open? My oldest one is 12 years old.