Department Store Credit Cards

Did you ever get invited to a party that you know you shouldn’t go to? You love being invited and the very idea of a party sounds great, but you know that there’s a good possibility of bad behavior and a hangover. That’s probably the way you ought to think about retail store credit cards. You stand in line with a handful of socks at Target or Macy’s, and when you get to the register the delightful salesperson asks you if you like to save an additional fifteen percent on today’s purchase by applying for a store credit card. What could be more innocent and enticing? You don’t have anything else to do anyway. A short time later the card arrives in the mail and when you see the interest rate you wonder what you could have been thinking. The APR on a store card is typically over twenty percent while your regular generic Visa or MasterCard clocks in between ten and fifteen percent. You weren’t hit over the head and lose your senses, and you never drink – while shopping for socks – but some deep impulse to bond with the retailer must have come over you. So you put it in your wallet and put it out of your mind until you’re driving past the mall and see the store and think of how easy it would be to pick up another pair of socks, or a lawn tractor. Industry estimates say that the market for store credit cards surpasses $100 billion annually so many consumers clearly are wooed by the suave proposal of the cashier and the enticing initial discount. Still, smart personal finance practices dictate that ownership of these cards holds many pitfalls. In addition to the high interest rates, the cards can be addictive. Once you have Target you want Wal Mart. Once you have Macy’s you want Nordstrom’s. With the strong push from the sales counter to take the charge card right there on the spot, the temptation is too much for numerous shoppers. Own a number of these high interest cards and not only do you look more suspect to lenders, but keeping track of them all can become difficult and late or missed payments can damage your credit score. A lower credit score will impact the interest rates you pay for other borrowing. Issuers of store credit cards demand higher minimum payments than bank credit cards, and that is partly because they insist that you pay down the principal and also because the interest rates are so much higher. As with all credit it is best to use less than a third of your available credit since trouble with store credit cards is often worse than trouble with a regular Visa or MasterCard. Customers who sign up for store credit cards may also find that their personal information is shared with other companies or that they are placed on mailing lists. Many retail outlets routinely provide data to third parties looking to offer you special products, promotions or services. Buyers' personal information and purchasing habits represent another source of revenue to retailers, annoying consumers who are already flooded with offers they don't need or want. That instant fifteen percent savings may not be worth the problems and expense a store credit card may cause. Save yourself some real money and throw yourself a party, the kind where you decide how much trouble there will be.