Before making a decision to open another credit line, it is important to weigh the pros and cons of such cards.
Here are some things you should know when it comes to store credit cards and how they can affect your personal credit score.
Store Credit Cards: The Benefits
One of the best incentives offered by store credit cards are the deals they give you at the time of purchase and signing up.
Many store cards offer some type of discount as well as accrued saving throughout the year when shopping at certain locations or during certain seasons. Some retailers will also offer earned points when shopping to be used for discounts later on.
No two retailer credit card offers are exactly the same so it is important to understand what you are being offered and how it may affect your credit line in the future.
If used properly, store credit cards are also a great way to build your credit score.
By using your store credit card and paying it off frequently, you can establish positive credit habits that can benefit your credit score in the long run.
Store Credit Cards: The Down Side
Although the benefits of store credit cards may be enticing, there are a variety of negatives that need to be considered as well.
Many store credit cards have high interest rates, some as high as 30%, which may put consumers in a financial hole if the balance of the card is not paid off in a timely fashion.
Additionally, these credit cards can encourage overspending at the store from which they originate. It’s easy to fall into the mindset that when you spend, you are earning points or discounts. While that might be true, you are still spending money.
If your credit balances become too high, it may become extremely hard to receive credit in the long run. Above all, it is important to monitor your spending and use credit cards to benefit your financial well-being.
If you have any questions regarding personal loans or credit card usage, the team at Camino Federal Credit Union can help.
Contact us today at 800-835-3400.