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8 Reasons to Say No (or Yes) to Store Credit Cards

Written by
Samantha Rose
Samantha Rose is a personal finance writer covering financial literacy for OppU. Her work focuses on providing hands-on resources for high school and college-age students in addition to their parents and educators.
Read time: 6 min
Updated on August 26, 2022
man and woman with their hands on their faces learning about 8 reasons to say no (or yes) to store credit cards
Are they worth it?

It’s a familiar situation. You’re standing at the register, ready to complete your purchase when the salesperson offers you a sweet deal. “Would you like to sign up for our credit card and save 50% on your purchase?” 

It’s tempting, but is it a good idea?

A store credit card from your favorite retailer can be a smart way to reap the benefits of VIP treatment — discounts, points, and cash back. But they also come with downsides to consider, like high interest rates and the potential to damage your credit.

Before signing up for a store credit card, weigh the pros and cons. And be sure to compare it to other store credit cards to find the best one for you.

Cons of store credit cards

No. 1: Late payment fees

You open a store credit card, rack up a bill, and then forget to make your first payment by the due date. It’s a common mistake, but it can cost you a lot of money. The penalties for misusing a store credit card are high, due to late fees and high interest rates. 

The best method to avoid late payment fees is to keep track of your billing cycle, pay your bills on time and in full, and not spend more than you can afford. Based on the number of Americans who owe credit card debt, this is sometimes easier said than done. But it’s important to not rely on your credit card, especially in financial emergencies. An emergency fund is a good alternative in these situations. 

No. 2: High interest rates

Store credit cards charge notoriously high interest rates. These higher APRs are likely due to store credit card’s higher approval odds and low spending limits. Retailers often justify the financial risk of cardmembers based on the revenue generated from fees and interest rates.

High interest rates won’t affect you if you pay your bill in full. But if you carry a balance from month to month, you’ll pay a higher price for the purchases. Research and compare the interest rates on different store credit cards before applying. Once you’re approved, remember to pay the full amount on your bill to avoid excessive fees.

No. 3: Hard credit inquiry

Did you know that when you apply for a store credit card, you’ll most likely receive a hard inquiry, not a soft pull, on your credit report? When you submit an application, you’re authorizing the company to run a credit check before extending a line of credit. Hard inquiries are negative dings on your credit report that last for about two years.

Don’t apply for several store credit cards at once. The multiple dings on your credit report won’t look good. Instead, wait between each credit card application. If you already have a low credit score, seriously consider your approval odds and if the possibility of a new card is worth the credit score hit.

No. 4: Impacts credit score

Credit cards are financial tools that have the power to impact your credit score — positively and negatively. But the impact they make is up to the cardholder. 

Most credit scores range from 300 to 850, with higher scores suggesting a high creditworthiness. Credit bureaus calculate your credit score based on various factors, including:

  • Payment history
  • Length of history
  • Utilization
  • New credit
  • Mix of types of credit

In order to increase and maintain a high level of credit, you need to be a responsible spender. Avoid racking up debt at all costs. That means not missing a payment, keeping your store card under 30% utilization, and ideally paying off the balance in full each month. Consider whether another credit card will offer value not provided by your other cards. If you’re not up to the challenge, a credit card might not be the right financial solution for you. 

Pros of store credit cards

No. 1: VIP exclusives

Are you in the market for early bird specials, exclusive discounts, and freebies? A retail credit card is your best bet.

A store card is a smart way to take advantage of extra perks at your favorite retailers because they reward customers for loyalty. In fact, frequent shoppers can often save more money as a cardmember versus carrying a general consumer credit card. Sign up to access exclusive cardholder benefits. Start shopping by charging purchases to the card and earning rewards points. Just make sure to pay on time and in full.

No. 2: Financing options

A significant perk of membership is the financing option that a credit card provides. If you are granted a store credit card, the retailer views you as a credit-worthy customer. Store credit cards extend a line of credit that can be used on items specific to the retailer, both in-store and online. 

Take advantage of the store’s financing options to make large purchases budget-friendly. As with all credit cards, responsible spending is key. Don’t overuse your financing options to rack up unnecessary debt. Do use your card to make purchases that you can reasonably afford to pay off within a certain time frame. Make on-time payments and maintain a low credit card utilization to pay off in the long run.

No. 3: High approval odds

Do you have bad credit or no credit? Opening a store credit card might be a smart financial move. 

Store credit cards have higher approval odds with fewer credit requirements than traditional credit cards. Take advantage of this more accessible way to build credit. Increase your credit limit, build credit history, and improve your credit score. But store credit cards are only beneficial if you pay in full, on time, and if you avoid racking up debt.

(If you're interested to learn more about bad credit loans, be sure to read the OppU Guide to Bad Credit Loans here.)

No. 4: Short-term credit building

Thanks to the higher approval odds, store credit cards are an accessible way to start building short-term credit history. Keep your account in good standing and reap the benefits of the good credit score to eventually follow.

Store credit cards work like any other revolving line of credit. You make a purchase, receive a monthly statement, and pay off your balance. Your financial behavior — whether good or bad — will most likely be reported to the three major credit card bureaus and helps determine your credit score. That’s why it’s crucial to use your store credit card responsibly. Avoid missing a payment, racking up high limits, and other risky behavior. Negative dings on your credit report can last for years and drag down your score. 

Live by this golden rule: Pay off your entire balance every month. If you can’t, then it’s time to stop spending.

Bottom line

Store credit cards are tempting, but are they worth it? Consider your personal financial situation and weigh the pros and cons before applying.

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