If you are one of those people who just can’t live without shopping, you probably heard of the line “Sign up for a credit card and enjoy more discounts!” Do you ever wonder how these kinds of cards work? Is it a win-win scenario? Store credit cards are designed to provide you with additional in-store discounts and even points to use for different partner stores. But how does it really work?
Just like any other conventional credit cards, it works by making your purchases through the credit card and paying it off at a given time. The main differences are the interest rates that can accumulate over time if you are not able to pay as scheduled. Since you can easily qualify for a store credit card, interest rates also tend to be more expensive.
Retail cards bring out the inner shopaholic in us. Because of exclusive perks, you might get tempted to shop more, thus spending more than you need to. To be able to maximize its benefits and minimize additional fees, you must be knowledgable of the ins and outs of these types of cards.
One major advantage of a retail card is that its qualifications are much lower than the traditional credit cards, meaning even with bad credit, you’ll likely be able to get a hold of a credit card. This way, if you have a bad credit score, you will have the chance to improve it gradually. However, to be able to do this, you must be responsible in paying off your balances and maintaining it below your limit. If you are able, pay the full amount every month to avoid any fees and bad credit reports.
However, one major drawback of a retail card is that they tend to have a higher interest rate than those of the regular bank credit cards. So before anything else, make sure to review all fees and benefits to know if you will benefit more in using it.
Another disadvantage of having a store credit card is that the chances of spending more money than you plan to is high. Because of this, you might eventually accumulate fees and high interest rates that are hard to pay off. Even if you create a budget for the things you spend, it’s easy to swipe the card and just forget about paying it off, and this will eventually lead to frequent overspending.
