Picture it: You walk up to the cash register with a pile of clothes, cringing about the amount of money you’re about spend in the name of looking presentable in public. As the cashier gives you the store credit card spiel, you roll your eyes. You know store credit cards come with sky-high interest rates. You’d never fall for that when you have a great rewards credit card sitting in your wallet, ready to be swiped.
But then, you hear the words “and you’ll receive 20% off your purchase today.” Suddenly, a store credit card sounds appealing. Should you take the bait? Here are four questions you should ask yourself before applying for a store credit card.
1. Do the benefits outweigh the rewards you could get with a regular credit card?
Getting a discount and ongoing rewards may sound like a good deal, but you need to examine whether or not it’s a better deal than using your normal rewards credit card. Cash back and travel rewards generally average out to around 2% of your purchases, and some cards also offer signup bonuses worth hundreds of dollars. This will likely go much further than getting a one-time discount at a store.
2. Do you shop at the store often enough for it to be worth it?
If the card isn’t for a store you shop at regularly, you won’t be able to capitalize on its perks beyond the original discount. Consider whether or not you shop at the store frequently enough to take full advantage of the benefits offered. Otherwise, using your regular credit card is the better way to pay.
3. Can you get a similar discount by shopping online or waiting for an in-store coupon?
A quick Google search should provide you with a list of coupon codes if you buy online. Or, if you don’t need the merchandise immediately, you can sign up for the store’s mailing list and wait for an in-store coupon to be delivered to your inbox. You’ll avoid triggering a hard inquiry on your credit report by applying for new credit and you’ll still enjoy the discount.
4. Can you pay off the balance in full each month?
Credit card interest rates are very high, so you should always pay your balance in full monthly. This is very important with a store credit card because the rates are generally higher than a regular credit card — often close to 30%. A word to the wise: Never finance anything nonessential at 30%.
Bottom line: Store credit cards generally have higher interest rates, lower limits and more restrictions than regular credit cards. Before signing up for one, consider whether or not the benefits are better than you could get with your traditional rewards card, you shop at the store frequently enough, you could get a similar discount without getting the card, and you can pay the balance in full each month. If it’s not worth it in your case, consider one of these credit cards that reward you for shopping instead.
Women with credit card image via Shutterstock