Question: Should I Use a Store Credit Card?
Store credit cards are offered with nearly every purchase you make at a store. Store credit cards started primarily with department stores, but now you can get them from home improvement stores and chain stores such as Target. The main selling point on a store credit card is that it offers you an additional ten percent off of your purchase price every time you use the store’s credit card.
However, it is important to remember that the store would not offer a ten percent discount if it was not to their advantage. The average interest rate on a store credit card is about twenty percent. If you purchase the item, and then do not pay the balance off in its entirety the store is going to make back the discount and then some over the time it takes you to pay off the card.
If you can be disciplined and pay off the card in its entirety every month, then it may work to your advantage. Some people will make the charges on the card, and then go straight to the customer service desk to pay off the balance in full. This option only works if you are extremely self-disciplined. If you are not, then you should not run the risk of falling into the credit card trap.
Another disadvantage to using the credit card is that people spend more money when things are on sell or they are getting a discount and when they are putting the purchase on a credit card. If you have a strict budget of $100.00 per month for clothing, and you put it on the credit card, and end up spending $130.00 to save on the discount, you still overspend the amount that you had set aside, and since you are putting it on a card instead of paying cash for it, it is easier to let yourself overspend consistently, which will drive up your balance.
It is safer to avoid the trap and temptation of store credit cards, and stick to paying cash for all of your purchases. If you need to save money, shop the sales, and use coupons when you can. If you are careful about the way you spend, and what you buy, you will be better off than running the risk of running up your card. If you currently have store credit cards, stop using them, and begin working on paying your balance down as quickly as possible.
Store credit cards should be treated the same as any other credit card. If you are carrying a balance on any of your credit cards, you should set up a debt payment plan. A budget is another important tool to help you get control of your finances. If you are sticking your budget, and paying off the store card in full each month, you will reap the benefits offered. If you cannot pay off the card or you are overspending in budget categories because of the card, you should steer clear of using the card completely.