Top Three Questions and Answers About Store Credit Cards and Gift Cards
Store credit cards and gift cards can be convenient and tempting. They can also be trouble if not used properly and managed well. Below are three of the most commonly asked questions and answers about store credit cards and gift cards.
Isn’t It Worth Signing up for a Store Credit Card in Order to Get the Ten Percent Discount?
Unless you are making a huge purchase, the answer is no. Even if you ARE making a huge purchase, the answer is still usually no because there is often a limit about how much you can save with the ten percent discount.
While it may seem tempting to get a small discount for signing up for a store credit card, the bottom line is that it is just not worth it. Even if you really never use it, you will have to go to the trouble of canceling it.
Also, your credit score may take a small hit just from the store doing the inquiry on your credit report while processing your application.
The biggest reason it is not worth it is because, even if you have the best intentions, many who say that they are signing up just to get the discount, do go on to use the card. Store credit cards are just not a good thing to have. The interest rates are usually much higher than those for the major credit cards and the late and over the limit fees are typically the highest amount allowed by law.
Do Gift Cards Have Any Hidden Negative Features?
Gift cards can be a convenient way to get all of your gift shopping done, but it is important to know which gift cards have features that may make them not such a great deal.
One such feature, that will typically not be made known to you when you are purchasing the card, is an expiration date. Because a certain percentage of consumers will never use their gift card, the stores can count on a good profit from their sale. To ensure these profits, many stores place expiration dates on their gift cards. Some are only good for six months from the time of purchase.
Service and non-use fees are another unsavory aspect of some gift cards. A non-use fee is charged for every month that the card is not used after a specified period of time. A service fee is a monthly fee that is charged as long as there is a balance on the card, whether it is used or not.
Many feel that both fees and expiration dates are unfair, and have fought successfully to have limits placed on the issuers of gift cards.
While new federal laws have put limits on these types of features, they have not eliminated them completely. There are many gift cards that have no expiration date and do not charge any non-use or service fees. Be sure that the gift cards that you give are one of those.
As Long as I Pay Them Off Each Month, Are Store Credit Cards a Good Deal?
If you pay them off during the grace period then store credit cards are just as good of a deal as any other credit card. If you pay the balance in full during the grace period then you will not have to pay any interest so it is the same as if you paid cash.
The problem comes in that one month when you do not get your payment in before the grace period ends. When that happens, you will have to pay an extremely high interest rate. Even people with good credit often pay an interest rate up to 29 percent.
It is a good idea to avoid credit cards with high interest rates. Instead, choose a major credit card with a reasonable interest rate that can be used at most any retailer.
While you might intend to pay the balances in full each month, the truth is that you can’t really predict what circumstance could come along that may prevent you from doing so, and 29 percent interest is just too high of a price to pay.
Store credit cards and gift cards are not all the same. Be sure you know exactly what you are getting before buying or applying for either type of card.
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