Store Credit Cards – How Do Store Credit Cards Work?
Store credit cards are a great way to save money on products you already use and help you build your credit score if used properly.
In this article, we will look at how store credit cards work and how they can affect your credit. Store credit cards are issued by specific stores, and you can only use them at that particular store.
Some store cards come with rewards programs that give you points toward future purchases or cash-back rewards.
You receive these benefits as long as you pay your balance in full each month, but if you carry a balance from one month to the next, these rewards will not apply. Some store credit cards will even waive their annual fee if your balance is paid off in full each month.
What Are Store Credit Cards?
Store credit cards are a type of credit card that can only be used at the retailer or group of retailers that issues it.
As you would expect, this means you are limited in where and how you can use them, but also that a single store’s offering may not provide enough flexibility for your needs, since it won’t have the same wide range of options as a general-purpose card.
Other than being restricted to purchases made at specific stores or retail chains, store credit cards work just like other types of plastic.
They allow the holder to make monthly payments toward the balance owed, accrue interest on any remaining amount should they fail to pay off their bill by its due date and redeem reward points for discounts on future purchases or merchandise.
In case you are interested in getting a store credit card, it’s best to research where can you use them and if that would be beneficial for you. It will not take you much time, since they generally have easy approval.
Store Cards vs. Credit Cards: What’s the Difference?
Store cards and credit cards are two different kinds of bank-issued products. Store cards are issued by a specific store, whereas credit cards are issued by banks or credit unions.
On top of that, store cards can only be used at the issuing store, and their cardholders receive credit limits that are much lower than those for most other types of cards.
However, because they are not backed by a third party like Visa or Mastercard, store-specific cardholders aren’t as protected from fraud in case something goes wrong with the retailer.
On the other hand, since you are getting a credit card from a bank, you will have the needed support and protection from a third party such as Discovery or Visa. This is a very important thing, since you can use your credit card anywhere, and having that protection puts you at ease.
While store credit cards give you the possibility to only pay with them in certain stores, with credit cards you can buy anything anywhere, even fund your own business.
Store cards are issued by the retailer itself. These are usually branded with the store name and can only be used in that particular chain of stores.
They are generally not widely accepted outside this one chain and don’t require any type of credit check, so it is important to consider whether you’d need to use your card at another store down the road before applying for it.
Store credit cards have lower credit limits compared to other types of cards. It’s typically around $500.
Because of that, they also tend to have higher annual fees than most other types of credit cards. However, these fees can be helpful when you are trying to build up your spending history on a new card or if you are paying off some bills that aren’t accruing interest.
On top of that, store credit cards are good for bad credit, since if you are diligent with your monthly payments, you can improve it.
Credit cards are a form of unsecured debt that you can use to make purchases. They can be used anywhere, and they are convenient because they have a credit limit that you can use to buy items.
You will not be able to carry all the money in your wallet or purse, but with a credit card, you can purchase whatever it is you want without having to carry cash.
They also help build credit for consumers who do not have any other sources of personal loans. This way, when applying for loans or mortgages later on down the road, you will have better chances of obtaining them if your credit history shows steady payments on previous debts.
Store Credit Cards: Pros and Cons
Store credit cards are a boon for shoppers looking to save money on their purchases, but before applying for one, it’s important to understand that they come with pros and cons, and you should weigh them out before getting one.
Pros of store credit cards:
- You can earn rewards
- There are no annual fees associated with using your card
- Store credit cards come with instant approval
Cons of store credit cards:
- High APR
- Restricted usage options
- Limited rewards
Store credit cards may be easier to get than regular credit cards. Many store credit cards do not require a security deposit, so they are more accessible for people who are building their credit history.
They can also help you build your credit score. Using your card responsibly and paying off the balance in full each month can help you build a positive payment history that can be used by other lenders when they review your application for other forms of financing.
Also, pre-approval for store credit cards is much easier than getting approved for a normal credit card.
As much as they can bring you positive things, you shouldn’t overlook the downsides. In case you are not diligent with your monthly payments, you can end up damaging your credit score.
On top of that, they come with much higher APR than regular credit cards. You also will not have the possibility to use them anywhere, since they are tied to a certain store or brand.
Another thing with store credit cards is that you will not have many reward options as you would with normal credit cards.
How Can Store Credit Cards Hurt Your Credit?
Store credit cards are not part of your credit report. However, your lender may still check your credit history before approving a store card application.
That’s why it’s important to weigh out both pros and cons before deciding to get one. As much as they can help you improve and build up your credit score if you are not careful with your monthly payments, you can damage it.
So, in other words, yes, store credit cards can hurt your credit score if you miss your monthly payments and if you are not careful about how you manage them.
Can You Use Store Credit Cards Anywhere?
If you are wondering if you can use store credit cards anywhere, the answer to that question is highly complicated and depends on several factors.
Store credit cards are usually attached to a specific store or brand, and once you are approved for one of these cards, it will only work at that particular location. For example, if you get a Kohl’s card and spend $1,000 at the store over six months before your statement closes, then all of those purchases will be tracked using the Kohl’s rewards system.
This can make things tricky because other stores do not have access to this information unless they also have a similar rewards program.
In short, if you have multiple store credit cards connected with different rewards programs, bonuses and perks, getting approved for each one may help build up your profile as well as potentially increase your chances for opening additional accounts later on down the road.
Are Store Credit Cards Worth It?
Store credit cards are not as widely accepted as regular credit cards, and they can also be more expensive.
If you want to build your credit and get a better interest rate on your car, mortgage, or student loans, skip the store card. Store credit cards often have higher interest rates than regular credit cards which usually start at 10%, so it’s best to use those sparingly.
You might want to use them instead of your debit card if you know that you won’t be able to pay off the full balance at the end of each month, otherwise, stick with a traditional card that offers rewards programs and other perks like price protection and travel insurance.
When shopping for clothes or appliances, opt for cash instead of using a store card if possible. This way you won’t have any late fees or interest charges. In other words, it all depends on you and your personal needs.
Store credit cards can be useful if you are looking to build your credit, but they may not be the best option for everyone.
If you have bad credit or no credit at all, it might make sense to start with a regular store card before applying for another type of plastic, since you may find that this works better for you than trying to get approved for something else within minutes.
Whatever the case might be at the end of the day for you, we do recommend doing proper research and seeing if this is something that will suit your finances.