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If, like most of us, you have one or two favorite stores in which you enjoy shopping, you have most likely been approached about applying for their store credit card. The store credit card may offer extra perks such as immediate discounts, special offers, coupons, and flexible repayment options. In some cases, it may be easier to obtain this type of card than a traditional credit card. However, you want to be aware of the potential downfalls of a store credit card before deciding whether it’s the right step for you. Store Credit Cards Department store credit cards can be beneficial. Consumers who are financially responsible and who repay debts and bills on time, these cards can be quite rewarding. Some individuals may find it easier to use a store credit card to rebuild, or even build up, credit. Others can use the cards for generous savings on a one-time purchase, such as furniture. Consumers who regularly shop at the store will usually find that a store credit card can offer notable savings, especially when used with coupons and other benefits. Some department stores may also offer bonuses such as interest-free financing. Before you apply for a store credit card, however, you should be aware of some common drawbacks. For example, some cards have high interest rates, along with short grace periods. Since many store credit cards offer a quick way to save 10 to 15 percent on purchases, consumers may be more likely to quickly accept the card and then immediately begin to spend. Another factor, that most do not consider, is that this type of credit card plays a role in determining your overall credit score. Credit Cards and Credit Scores Credit cards can have an impact on an existing credit score, whether it’s good or bad. Either way, you should know how credit cards affect credit scores. From store credit cards to universally known cards, there are components to think about before you open or close an account, as these actions might have an impact on your credit score. To avoid impacting your score, remember a few key components. First, you should try to only apply for credit that you actually need and will be using in the future. For example, if you are opening a card only to get a one-time 10 or 15 percent savings, you might just end up with high interest rates and a reduced amount of time in which to pay off your debt. Additionally, you should not close old credit card accounts that you are no longer planning to use. This is because closing an account, which is no longer being used, reduces your available credit and increases your balance to available credit ratio. Also, your credit score is based, in part, on the length of time credit accounts have been in use. So, if you must close an account, make it a newer one. Remember, too, to only fill out an application for a credit card that you know will fit your everyday lifestyle needs. You should be aware that, in many instances, credit cards keep you in debt. For example, only paying the minimum amount each month leads to an accumulation of debt, which will have a negative impact on your credit score. You may, also, end up paying additional fees if you exceed your credit limit or make late payments. Another source of trouble might be if you view your credit card as an unlimited source of money. Tracking Your Credit Score Your credit score is a number that largely signifies your financial responsibility. The score is comprised of your financial history; including how and when you repaid any debts or loans. Other factors include how many lines of credit you have open, the types of credit you have, and whether you have been paying outstanding balances in full and on time. A good way to see where you stand is to take a look at an average credit score range. When you do, you will see that scores between 740 and 850 are considered to be excellent, and ensure that you will have access to good interest rates as well as low repayment terms and fees. A score of 700 to 740 is still very good and will offer approximately the same benefits as an excellent credit score, but with slightly higher interest rates. Numbers between 641 and 699 are average, while 500 to 640 is below average. A number between 300 and 500 is bad and might prove to be a challenge. A good way to stay on top of your financial status is to monitor your credit on a routine basis. For some consumers, a department store credit card can be very rewarding. Such cards can offer good savings and a solid way to build credit. However, when they are not used wisely, the cards can cause an existing credit score to decline. Joy Mali is an active finance blogger who is fond of sharing interesting finance management tips to encourage people to manage their personal finances. More specifically, she advocates that people should check credit reports and scores regularly.
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