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Understanding store credit cards
June 18, 2012 - 1:07pm
This is a common scenario for many consumers: you're in line about to complete a particularly large transaction when the clerk informs you about a store-specific credit card. With it, the clerk says, you can save on expensive goods, receive cash back and even get a large discount on your current transaction. It seems too good to be true, but is it?
Store credit cards are a complicated subject and many consumers are finding that it is best to fully investigate them before impulsively agreeing to one at checkout.
Before signing up, it is best to look deeply at the agreement. The variety of different options is extensive, so considering what benefits would be most useful to you is wise. Although it is tempting to get the card immediately so you can apply it immediately, it is probably wise to take it home to inspect more carefully.
This is important because sometimes the fine print drastically changes how you might think a card works. At Walmart, for example, a store card offers 1 percent cash back on purchases - but only if you spend $3,000 a year, according to Consumer Report.
This isn't to say that there aren't bargains out there. By inspecting the agreements closely it is possible to find cards that suit your situations well. Whether it's a store that offers money off your initial purchase - such as JCPenny - or lets you accrue points for each dollar you spend - such as Amazon and BJ's - store credit cards can help you save if you pick them wisely.
Furthermore, store credit cards can let younger or less experienced consumers build credit history.
"[Store cards] are generally easier to get than bank cards, so they can help you build a credit history," Consumer Reports' Greg Daugherty told WPVI, a Philadelphia ABC affiliate. Of course, there's often a downside because of this. "But if you acquire too many at once, that can hurt your credit score."
This last point is important to consider with store cards. Because they are often targeting a different demographic and have different rules to follow, store cards often have much higher rates than traditional cards.
In light of this, many consumers are finding that sticking to traditional cards - which are increasingly offering comparable rewards to stores - might be a safer bet. With this in mind, cards that accept credit cards of both kinds are likely to do the most business. Finding what payment processing options your merchant services provider offers can help attract customers of every stripe.