Let’s face it, those credit card offers when you check out at your favorite store are tempting. As a way to get you to apply, sometimes the cashier will ask if you’re interested in getting a sweet discount on your purchase. But are store credit cards worth it?
As with everything, retail and department store cards come with pros and cons. The pros are clear: you can save money on store purchases, both on that very first purchase that comes with applying for a store card, along with occasional promotions. And, you know what we’re talking about: right around the time Mariah Carey starts singing “All I Want For Christmas (Is You),” your email inbox starts to fill up with tons of exclusive card offers so you can get discounts on your holiday shopping.
But let’s talk about the sometimes downsides to these cards. A retail store’s credit card isn’t quite the same as a regular credit union or bank credit card. Here are some things to think about before you decide to apply for a store card.
No Cash Back or Rewards
One of the great things about a credit card from a traditional financial institution like a bank or credit union is the ability to earn rewards. Credit card perks like cash back, gift cards, and points you can redeem for other benefits. Pro Tip: a UMe Visa offers awesome rewards on every purchase, like cash back!
Lower Credit Limits
In addition to the lack of rewards, credit cards from your favorite store can be great as far as it goes — but they might not get you very far.
Your store card doesn’t have as high a limit as a conventional credit card. If you’re someone with poor credit or not much in the way of credit, your credit limit will be even lower, sometimes as low as only $100 or $500.
Additionally, the result could actually end up hurting your credit in the long run. It could drive up your credit utilization rate (that’s the ratio of the balance on your credit card to your card limit). If that ratio exceeds 30%, you’re going to start to see some damage to your credit score.
So you have to ask yourself, is a store credit card worth it for saving a few bucks on a pair of joggers in the present, when you’re looking at higher interest rates on an auto loan or mortgage in the future as a result of a lower credit score?
If you’re looking to establish or build your credit so that you can get the lowest interest rates possible, consider transferring your high interest debt over to a UMe Visa (with NO balance transfer fees!).
Those immediate savings offers that pique your attention might not end up saving you as much in the long run!
A store card will often have a significantly higher interest rate than a traditional credit card. Unless you plan to pay your balance in full each month, you could be looking at accruing quite a bit of interest if you make a large purchase at your favorite retail outlet and carry a balance into the next month.
So if you’re trying to level up your personal finance game, it might be worth considering whether that store card is worth it if you’re trying to save.
Limited Options and Bad Spending Habits
We totally get it if you have a favorite store. Like, an absolute favorite place to get all your favorite clothes/cosmetics/sporting goods/pop culture memorabilia. Maybe you even shop there on a regular basis…
The fact of the matter, though, is with a lot of store cards, you would need to shop there a lot to really make it worth it, and then you’re at risk of using your card too much.
We’ll explain: While there are a few exceptions, most store cards have limits outside of the store where they’re issued. Some cards can be used at a family of stores or other approved places. But by and large, they’re really only good at certain places.
Since you now have a card that you can only use at your all-time favorite store, and they’re always bombarding you with messages about sweet deals, you may find you’re shopping there more than you normally would otherwise, racking up debt and interest. Even just applying means a credit inquiry, which puts a ding in your credit score.
U Deserve a Card That Works for U!
We know you want to save money and also practice some self-care with retail therapy at your favorite store. That’s why we think you deserve a card that offers you more than occasional (strings-attached) discounts!
A UMe Visa comes with rewards, low fixed interest rates, and no fees on things like your application, cash advances, and balance transfers. But there’s even more to love:
- Earn rewards — like cash back — on every single purchase!
- Instant card issue in-branch
- Enjoy the same fixed rate for cash advances as you have for purchases, with no cash advance fee
- Extra security and perks when enrolled in Visa Checkout
- Verified by Visa fraud detection + Zero Liability
- Online account management
- Friendly, personal UMe Credit Union service
Still on the fence about whether store cards are worth it? Click below to learn more.UMe visa measures up