Are store credit cards worth applying for? When you get to the register and someone asks you if you would like to save 20% on your purchase with immediate application and approval, you may think it sounds like a great deal. The instant savings that can be had by opening the credit card account may be the only positive effect you receive. There are pros and cons to having credit cards which are limited to certain places.
What are some perks to applying for and using a store credit card?
For starters, whatever the immediate savings are at the time of application was a good incentive to get you to fill out the application. There may be monthly promotional incentives with continued use of your new credit account. If the store is one that you frequently shop at, it could bring you savings for the long run.
Use of this credit card could possibly build up your credit score with continued purchasing and on time payments. Having some credit to show a responsible financial history of good borrowing will help you build credit.
What are the disadvantages to applying for store credit cards?
Store credit cards tend to have higher interest rates, so if you plan to use them consistently, your annual percentage rate will eat at your income. It is good practice to pay the balance off each month when using these cards for the sole purpose of utilizing special offers. The credit limits on these cards are typically low in comparison to others. Keep the percentage of your balance used to 30% or below in order make the credit history on this card a positive one.
Having too many credit cards open and balances which are filled relates as a negative on your credit report. Credit bureaus use your debt to income ratio as 30% of your total score. How much you owe on cards as well as how much you could possibly owe ranks heavily on your score. Many stores offer online savings just by signing up for their email list. The offers to credit card holders may be higher, but you have to think about what your true savings will be if you make long-term payments on that purchase. Receiving monthly offers for savings may increase your temptation for purchases that you may not otherwise spend money on.
Credit cards which limit your spending to certain stores may not be your best option. Since having too many cards open with balances can hurt your credit, it may be in your best interest to apply for a universal credit card which can be used anywhere and have lower interest rates. Sign up to receive store promotions by email and control temptation spending.
Keeping financial matters in order, by utilizing all your money options, will promote a better balanced budget.
- Do your best to not spend more than 30% of your credit card balance.
- Take out an online payday loan when your paycheck is just a few days away.
- Give yourself a spending budget which you adhere to each month.
- Payoff as much of the balance each month in order to keep interest costs low.