Department Store Credit Cards

Are They Always a Good Idea?

Department store credit cards seem like easy opportunities to acquire credit. However, getting these cards is not always a good idea.

Each prospective candidate for such a credit opportunity should review his or her needs and determine if one of these cards will provide help rather than hurt credit ratings.

A lot of credit card owners have suffered in the years since the economic crash that began in 2008. As a result, there was a rapid increase in the number of people who had to default on their cards.

    Rebuild Credit
    Having a bad credit history makes it very difficult to restore your credit rating.Often, people with poor records like this have to wait years before anyone will offer them an unsecured line of credit. Sometimes, people try to accelerate this process by acquiring secured lines of credit.

    They can also get back on the road to good credit with a card from a store. Often, these merchants will offer clients unsecured cards with low limits. For example, a customer with bad credit might successfully apply for a card with just a $200 limit on it.

    Using this card and paying it off regularly could be the first step to renewing your credit score and earning offers of superior cards from other institutions. Credit with a department store is also an easy first step toward building credit for someone with no credit history.

    Store Discounts
    There are times when this move makes sense even for someone with good credit. For example, many stores will offer large discounts when you apply for that store's card. If you have to make a large purchase, such as when you buy a house and want to buy new furniture all at one store, these savings might make department store credit cards the best choice.

There are risks with department store credit cards as well.
    • Cards issued by stores usually have much higher interest rates than those issued by banks. This immediately puts you in a risky position with payments that are potentially too high.

    • Chances are that the store from which your request a card already accepts other forms of credit, such as Visa or MasterCard. You unnecessarily complicate your payment situation when you add another card to your collection. You may be better off just using an existing credit.

    • A specific store's card limits your ability to do some comparison shopping. You can only use it at that specific store or its other branches in most cases. This could spur you, consciously or unconsciously, to ignore less expensive prices at one store because you have credit at another.

    • Finally, the worst thing about attempting to open credit at a store is the hard inquiry that registers on your credit report. When you seek new credit with one of these establishments, you can end up lowering your credit score. Estimates with regard to the damage range from a mere 5 points to a much more significant 35-point reduction in your score.

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