Are In-store Credit Cards a Good Idea? – Pros & Cons

As you look for ways to save on shopping, in store-credit cards are sure to cross your mind.  These are credit cards issued by specific retailers to be used in a single branch or across the chain. They are usually discount incentivized and they earn you reward points. However there are some pitfalls that come with using them, for example high interest rates. So, are in-store credit cards a good idea? Here are the pros and cons:

Credit Cards a Good Idea

Pros of In-store Credit Cards

  1. Big Discounts

When it comes to huge shopping like during holidays or for that one pricey item then having a retail credit card can be handy. This is because they come with discounts which can range anywhere between 5% and 20%.

The deal is even made sweater if you are applying one for the first time; you get opening discount which can be as high as 40% for the first purchase.

  1. Building Credit

In-store credit cards are good financial tools for building or rebuilding credit. To start with, not much is required in terms of qualification; you will rarely be denied one no matter how bad your credit score is. This is in contrast to other lines of credit whereby your credit history is thoroughly scrutinized.

When used sparingly and low balances are maintained, these cards will increase your credit points. This is by reducing your debt-to-credit ratio which accounts for 30% of your credits score.

  1. Zero Interest and Other Perks

To remain competitive, most stores offer zero interests on purchases during promotional periods. This is usually during holidays when card shoppers are incentivized to shop more without paying extra.

Some in- store cards also come with other special perks such as;

  • Free shipping
  • Bonus coupons
  • Free gift wrapping

It’s also possible for card holders to get extra reward points when they shop at a different store in the chain from the one that issued the card. It’s also worth noting that just like other credit cards, in-store cards allow you to buy when one does not have cash and defer payment to a later date.

Cons of In-store Credit Cards

  1. High Interest Rates

Unlike traditional credit cards, in-store credit cards come at much higher interest rates. Store-only credit cards can have an APR of up to 26.38%, which is much higher than the average national which is around 16.7%- according to a survey carried out by

  1. Harming Credit Scores

Each store card that you apply for is a hard inquiry on your credit report. This ultimately lowers your score especially if you apply for several of these plastics in a short time.

With rewards and discounts being thrown at your face, many people find themselves carrying huge balances on their cards. This increases their credit utilization which accounts for nearly 30% of your FICO score.

Pro Tip:The best way to make these cards work positively for your score is by ensuring that you only use 20% to 30% of the credit that is extended to you by the store.

  1. Incentives Could Work Against You

With so many incentives to look forward to, many card holders tend to only shop in the specific store or chain. This may put you in a disadvantage by missing out on better deals that other stores may be offering.

To mitigate this, you should first window shop especially for large or holiday purchases. This will give you an idea of what other stores are offering–go for the cheaper option even if it means paying by cash to keep your budget in check.

Bottom Line

In-store credit cards come with rewards, discounts, coupons and other such incentives. They also allow you to buy when you are cash strapped. That said, they should be used sparingly since they attract high interest rates and overindulging in them can lower your credit score.

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