Holiday Shopping Tips: Understanding Store Credit Cards

Marshfield Medical Center Credit Union > Blog > Holiday Shopping Tips: Understanding Store Credit Cards
about store credit cards

Many stores offer store-specific credit cards that provide special rewards to their customers. Though these might seem like a great idea, it’s important to approach these credit cards with caution. Just because you might save on the purchase you are making today, it can be tempting to go ahead and sign up immediately. However, taking a moment to pause and evaluate the risks vs rewards is important.

“When you’re out shopping for the holidays, it’s easy to get caught up in the savings you can experience by applying for a store-branded credit card,” said MMCCU President David Murphy. “Applying for multiple cards in a short period of time can negatively impact your credit, and it’s harder to make sure you’re sticking to your budget when you start adding cards to your wallet you did not originally carry.”

Before signing up for a store credit card, it’s important to remember a few key things:

  • Each time you apply for a credit card, your credit takes a hit
  • The benefits usually aren’t that great, especially when compared to a generic credit card
  • APR’s are often higher with store credit cards -While the average non-retail credit card has an APR of 19.92%, the highest retail card APR of 2021 is 29.99%, according to CNBC)
  • Store cards encourage spending
  • They provide the store with valuable consumer data – are you ok with your information being shared?

“Also, consider, do you shop regularly at the store you’re requesting the card through? Some companies will cancel credit cards if they aren’t used after a certain length of time, so by the time you return to the store, your card may already have been cancelled,” said Murphy. “It’s also easy to lose track of a card after the holidays are over, and a missed payment on any credit card can be detrimental to your credit score, which could cost you in the long run.”

Credit card companies make most of their money from interest, fees charged to cardholders, and transaction fees paid by businesses that accept credit cards. As a consumer, it’s important to make sure you are also seeing benefits from the card that don’t outweigh the risks.

“If you do decide the addition of a store-branded credit card makes sense, double check to see if the card is accepted outside of the store. Some cards can only be used in the store which they are branded for while others allow you to earn rewards for purchases made anywhere. Make sure the benefits of any card fits your financial strategy,” added Murphy.

To learn more, contact MMCCU!

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