NEW YORK (MainStreet) — Store credit cards often get a bad rap, largely due to the fact that standard credit card products tend to offer more incentives, regardless of the clerk’s sales pitch. But like student and travel cards, store cards are changing and some may prove worthwhile to frequent customers – though there are still some you should avoid at all costs. Here’s how to determine which store credit cards you should never apply for.
The credit limit is painfully low.
Although credit bureaus maintain that a card doesn’t need to be from a major issuer to boost your credit score, store cards tend have less of an impact on your credit score since the credit limits typically associated with the cards are too low to positively impact your debt utilization ratio. It also doesn’t give the spending power or flexibility that a card with a higher limit would, so it’s a good idea to ask the store clerk who is offering you the card what the terms will be before filling out the application.
You won’t be able to pay off the balance you’re initially required to charge at the end of the month.
Stores generally require the new account holder to charge the purchases they are making to the new account at the time of the application. But customers who won’t be able to pay off the balance come month’s end – or who tend to carry a balance in general – might want to ask what their annual percentage rate will be. Many store cards carry interest rates on the high side. As we’ve previously reported, cardholders should be wary of any card with an APR well above the 22.99% mark. You can check out this MainStreet article to learn more about what types of APRs you should be looking for.
The retailer doesn’t have a straightforward rewards program.
It’s not a good idea to sign up for a card if you don’t know what the benefits will be beyond the initial sign-on discount on the purchase you are making. Instead, opt for a store card that features a transparent, clearly established rewards program. Amazon’s Rewards Visa card, for example, offers cardholders three reward points per $1 spent on eligible Amazon purchases, two points per $1 spent on eligible gas, dining, drugstore and office supply purchases, and one point per $1 on all other eligible purchases. Macy’s American Express card – not to be confused with its standard store card – offers cardholders 3% back on all store purchases and 1% back on all other purchases.
As MainStreet has reported before, signing up for every store card that offers you a discount can negatively impact your credit score. Check out this MainStreet article to see which other seven small mistakes can hurt your credit!