Store credit cards
"Psst! Wanna big discount?"
Every waited outside at some ungodly hour of the morning for a major store to open its doors on a knock 'em down, drag 'em out sale? You know there are just 10 of the particular item you want and you're sure everyone ahead of you is going to make a beeline for the same thing. Well, how would you like to get inside an entire day before anyone else? You could with a card from the right store.
One of the first
J.C. Penney was one of the first retail stores to issue credit cards back in 1958. Since then, any store with a household name, and many others you've never heard of, have gone into the store credit card business. There's profit in plastic, and the plastic doesn't have to be in kitchenware. The Gap, Sak's, Bloomingdales, Wal-Mart, Target. Dillard's – if you can spell it, there's probably a store credit card for it.
An additional benefit of store credit cards is that they can be a good way to establish credit. Store credit cards are often easier to get than the major cards, in part because they usually have lower credit limits.
Another benefit with some is that they will allow you to pay for major purchases over time without paying interest. You might be able to buy a computer or freezer with no interest for up to 12 months. Just make sure you pay it off before the end of the period. If you don't, retroactive finance charges will be applied.
Many earn points
Many store credit cards also give points for every dollar spent, enabling holders to rack up even more goodies in the store.
Among the negative aspects of store credit cards is the fact that most have interest rates that are higher than those for major credit cards. The question you should ask yourself before applying for one of these cards is whether you are disciplined enough to pay off the balance every month.
Forgetfulness can affect your credit rating. You might get a new card to buy a single piece of furniture because it comes with interest free for a year. You use the card, pay for the furniture within the specified time, and the card then gathers dust. Do that several times and you have several open lines of credit. The fact that you don't use the cards after the initial purchase means nothing; the reality for the credit bureaus is that you could use them.
Limit yourself to applying for one or two at the most in a 12-month period, or you might be seen as presenting a credit risk.
Check fine print
When you're standing at the checkout counter with an armload of parcels and you're being asked to "sign here for our all-in-one super-dooper reward-loaded credit card with special advanced sales", it's a little difficult to do the math. But check that the benefits are not outweighed by the APR, and that there are no minimum usage requirements. Of course, if you pay the bill every month you may not need math, but you should check out the small print anyhow. Take your time.
If you need to build good credit and you pay off your cards every month, store credit cards can be worthwhile.