Are Store Credit Cards Worth It?

If you do any shopping at all, you’ve undoubtedly been offered a store credit card along with a significant discount. Some of these deals sound pretty good. You might get a discount and free shipping. Some cards allow you to earn cashback.

But are these deals worth it? As with many things, the answer is, “It depends.” It’s essential to read the fine print and consider all the savings and costs involved. It’s also essential, to be honest with yourself about your shopping habits.

Keep these tips in mind when reviewing a store credit card offer: 

1. How much are you saving? There are different ways that a card provides benefits. 

• A card might offer 5% off all purchases. That’s great, but how much do you purchase in a year from that store? Calculate what your savings would probably be considering the items you usually purchase at that store.
• Free shipping for purchases at the online store. Like Target and Wal-Mart, many stores have online stores and will ship to your home. Some cards offer free shipping. But is all shipping free? Is it just smaller items? Read the fine print.
• Cashback on purchases. Are all purchases included? How much would you get back based on your usual shopping habits? 

2. What are the limits? Is there a limit to the cashback reward? Does the discount only apply for the first six months you have the card? Many perks have caps on them. Ensure you know the limits.
3. What is the interest rate? If the card has a low-interest rate, how long is that interest rate in effect? Are you good about paying your balance in full each month? How much are you likely to pay in interest each year? 

• The credit card is banking because many people will pay 20% in interest fees, which more than makes up for a 3% store discount.

4. What is the annual fee? You might think there is no fee, only to find that the fee kicks in after the first year. How does the annual fee alter your expected savings? If you don’t use the card a lot, you might find that the annual fee is greater than the amount you’re saving.
5. What is the credit limit? Most stores have low limits. One reason for a low limit is in the hope that you will go over it. What is the penalty for exceeding your credit limit? 

Based on this information, you can do the math and decide if the card is worth it for you. There is no blanket answer. The correct answer depends on the details of the offer, your needs, and your shopping tendencies.

If you use the card frequently, the annual fee is low, and you pay off your balance in full each month, the card can be a good idea.

It’s important to remember that credit cards are notorious for offering a great deal for new customers, only to reduce the rewards, increase the interest rate, and increase the annual fee. Be sure to read the small print before signing up.

Store credit cards can offer impressive perks and an excellent opportunity to improve your credit. But these cards usually have very high-interest rates. Be sure you’re getting a card that will improve your financial situation rather than cause financial challenges.