Why You Should Avoid Store Credit Cards

It is near impossible to leave a department store without hearing the phrase, “would you like to sign up for our membership program?” While some store employees are talking about a traditional no-obligation membership card that earns points, others are talking about a full blown store credit card. Unfortunately, store credit cards are typically pitfalls for anyone who struggles to manage their money well.

Store Credit Cards Have High Interest Rates

While store credit cards offer users some rewards after purchasing a certain amount of goods while using the card, they also contain higher than usual interest rates for those who fail to pay off their debt in a timely manner. In fact, many store credit cards charge an interest rate of more than 25% per year. This means a credit card charge of $1,000 will accumulate a $250 interest fee if it goes unpaid for a year. To put this in perspective, a typical student loan interest rate is near 5%. Therefore, store credit cards can cost users more despite the given awards.

Store Credit Cards Payments Are Easy to Forget

Making payments on a car, house, utilities, and credit cards are easy because these payments are typically synced up to a main banking account. However, store credit cards have their own websites that users need to visit to pay off their debts. Although the extra step of going to an outside website to pay off a debt may seem like a small inconvenience, just think of all the times you forget to buy an essential item at the grocery store. It only takes on regretful car ride home to realize how easy it is to forget something important. Unfortunately, this means taking an extra step to pay off a debt may result in forgetting about the debt in the first place.

Credit Cards from Your Bank Typically Offer Better Deals Overall

Although owning a credit card connected to a department store may earn you extra money for purchases from that store, the reality is that your rewards are set in stone at one retailor. Bank credit cards typically offer rewards that apply to multiple retailors. Although owning a credit card may be a bad investment in the first place, if someone wants to own a credit card, it is typically better to run a credit card through your banking institution for more versatile deals.

Financially staying above water can be difficult, but with American Investment Planners at your side, creating a financial portfolio has never been easier. If you want more pros and cons concerning store-related credit cards, contact us with your questions!