Walk into any major department store and more often than not you will be asked to apply for their store credit card which allows you to purchase merchandise from their store on credit. These store credit cards are much like any other type of credit card except you cannot use this card in any other venue.

If you shop often at a department or specialty store and they are offering you a credit card, it might be beneficial to you to own one, but if you rarely or ever shop at said store it is probably a good idea that you do not apply as this will be just one more bill each month you might have to pay. Often when they are trying to induce you to apply they will offer a discount on the merchandise you buy that day and if the purchase is a large one it might be a good idea to take advantage of the discount.

Are There Any Benefits to Having a Department Store Credit Card?

Having a store credit card is like a double edged sword. You can shop more often whether you have the cash or not at your favorite store, but this can also be a disadvantage because now you are spending money you don’t have. When you receive your monthly bill often the minimum amount due covers just the interest and perhaps a small amount of the principle. It can take some time to pay off a small balance on a store card when you pay only the minimum each month.

Store credit cards often have much higher rates of interests than do conventional credit cards. This means you can be indebted to the department store for a much larger amount of money than you originally borrowed. A good rule of thumb is to pay off the entire balance of a store credit card each month to avoid paying large amounts of money in interest payments.

The Bottom Line

These store credit cards can negatively affect your credit rating when a financial institution pulls your credit history for any reasons. Your income to debt ratio will be much higher if you have small balances on a number of store credit cards as these numbers add up. If the store card is offering you a discount on your purchases and a low interest rate for an introductory period and you feel you want to take this offer, just be sure that by the end of the introductory period that you pay off your balance to the department store in full if you are to reap any financial benefits.

What seems like a good deal in the beginning may not always be so as time goes by and when the real interest rate kicks in you will be surprised at how high it actually is. So be smart and pay off your balance before the grace period ends so that you don’t end up paying astronomical interest rates on merchandise you bought some time ago.