Advantages and Disadvantages of a Department Store Credit Card

Are you tempted to opening a department store credit card to save a buck when shopping? Many retailers offer in-house department store credit cards that may provide an immediate discount for opening the card. However, there are some disadvantages that need to be considered before opting into their credit card program.

Every time you apply for a credit card, your credit score is reviewed to determine the amount of risk you pose to the lender. Each one of those checks can lower your credit score as these inquires are considered negative activity.

Additionally at any given time creditors want their customers to have considerably more credit then is being used. Store credit cards typically offer their newly approved cardholders a line of credit close to the amount they are charging that day.  When the charge processes, the customers credit utilization ratio greatly decreases and a FICO point deduction may occur.

Typically, store credit cards are notorious for having some of the highest interest rates out there.  Those high interest rates can totally negate the initial discount you may have gotten for opening the card in the first place. If you only make the minimum payments, that initial 10% discount will be worthless in just a couple of credit card billing cycles.

All this being considered, there are some great benefits to department store credit cards. If you constantly shop at a particular department store, you will be entitled to special incentives just for you. Discount coupons, private sales and even free merchandise for quantity purchases may be coming your way.

Additionally, opening a department store credit card is a great way to establish first time credit. Consumers typically have any easier time getting approval to open a department store credit card. By paying them off in a timely fashion, you can use a department store card to its advantage and build a stronger credit history.

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