Event if the 20% discounts on these store credit cards are tempting the advice is not to open such an account. The stores are interested in having as many customers as possible owning this kind of cards because we are surely spending more money when we are using a credit card. More than that, on these private credit cards they earn a lot of money. There is a big difference between private credit cards, or store credit cards, were we pay an average interest rate of 24%, and the prime credit cards, like visa or master card, were the interest rate is around 12%.
Even if the Credit Card Protection Act of 2009 will go into affect in February, things won’t change a lot regarding the predatory practices. It won’t change anything about the interest rates. On the other hand the big plus is that it changes the transparency and the disclosure around the debts and conditions. From February on, you credit card statement will show you how many moths it will take to pay off that balance if you only paid them in a month and it affects how quickly fees and terms and conditions of the credit card can be changed, but it won’t stop any of this from happening.
Just signing up for such a store credit lowers your credit score. Because they like to see longer, older credit history, a new credit card makes your credit history younger, so for them it represents a higher risk. The other thing that lowers your credit score is utilization, when you utilize almost all the credit you have been given. The advice is to cancel all extra credit cards even if your credit score will take a hit, it will repair itself over time.
loading...
Related Links:
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.
loading...
Related Links:
Most major retail stores offer their own credit cards. While many are similar in features, there are some that are better than others. While some people choose to obtain a card from every store that they shop in, more and more are instead being more particular about which cards they want in their wallets. Below are three tips for receiving the best store credit cards.
Read the Fine Print
Sometimes the issuers of a store credit card will make promises of “no payment for six months” or “no interest for a full year”. The problem is that if you do not read the fine print, you will not learn that once the period for the promised special terms is over, the interest rate will be nearly thirty percent.
Sometimes, such special deals are wonderful, but only if you fully understand all of the details. For example, sometimes if you make even one late payment, the special terms are off and you have to begin paying the full interest rate.
Other cards offer what seems like a good interest rate, but the fine print says that the rate can be raised at any time. Some consumers who have great credit are surprised to receive a notice in the mail informing them that their interest rate has skyrocketed. They wouldn’t be surprised, however, had they read the fine print.
As with any credit card company, the store wants you to apply. They know that if you get approved, there is a really good chance that you will use the card. They make the card sound as favorable as they can in the promotional materials. It’s up to you to learn the truth by reading all of the fine print.
Know Thyself
Sometimes which store credit card is the best deal will vary depending on the person. For example, a new homeowner who may need to replace several major appliances may do well by applying for a card to a store that specializes in such products.
When you are making a decision about applying for a store credit card, you need to consider more than just the terms of the card. You also need to look at your needs and be honest with yourself about how you will use the card.
In addition to knowing your needs, you also need to know a little something about your self control. If having a store credit card with an $8,000 limit is going to cause you to go on a shopping spree until every dime of your credit limit is used up, then this is not the best store credit card for you.
A Sound Decision
A sound decision about whether to apply for credit is never made based on the possibility of receiving a ten percent discount. In other words, do not apply for credit simply because you are tempted by such an offer as you checkout.
Applying for any credit should be a decision that you make after weighing all of the options and doing sufficient research about the credit product for which you are applying. When you make a snap decision at the register, you do not have time to either think about or do the needed research.
Choosing the best store credit card is certainly about the interest rate and other features of the card. Still, you must also consider other factors such as how you plan to use the card as well as well as your overall credit situation.
If the result of adding another card to your wallet is going to be more debt and a lower credit score, then there is no store credit card that is the best for you.
If you do have a need for a store credit card, be sure to learn all that you can about the card before applying. Also, if you have a good credit score, call and talk to customer service rather than applying online or through the mail. Ask if they will be willing to grant you a lower interest rate based on your excellent credit history.
Many financial experts say it is best to shun all store credit cards in favor of keeping just one or two major credit cards. If you plan to ignore this advice, do some research so you can know that you are getting the best possible deal.
loading...
Related Links:
Store credit cards and gift cards are among some of the most widely used types of cards. Before using or purchasing them, it is important to learn as much as you can about these cards in order to avoid any surprises.
Store Cards
Store credit cards present a great temptation to many shoppers as they are checking out with their purchases. The sales clerk will often say “If you sign up for our credit card, you can get 10% off of your entire purchase.” In most every case, that savings is not worth it.
Store credit cards charge sky high interest rates, even for those who have very good credit. Also, any applicable fees are usually much higher than with other types of credit cards.
Keeping in mind that credit cards should only be used for emergencies, there is no real reason to have a store card. An exception would be for a store that carries major appliances. Sometimes, stores that carry such items will offer special pricing, but only to those who purchase with a store card.
While it was once fairly easy to obtain a store credit card, many retailers have made the approval process a bit more stringent. This has made it harder for those will shaky credit to obtain store credit cards.
If you are approved, you should work to pay off your balances each month in order to avoid paying interest rates of up to 28.99%.
For those seeking to build or reestablish their credit, store credit cards can aid in that way IF you use them properly. Most stores do report to the three major credit bureaus. In order for the store credit cards to help your score, you should never utilize your entire available credit limit and, as already mentioned, you should pay off your balances in full each month.
Gift Cards
Gift cards are a hugely popular item at many stores. As much as people seem to enjoy giving and receiving them, the stores also enjoy selling them. The reason is that a fairly large percentage of gift cards that are sold will never be redeemed, and that results in pure profit for the store.
Some stores have other ways to help make sure that their gift cards result in extra profits. This is done by charging monthly maintenance fees and placing expiration dates – sometimes as short as six months from the purchase date – on gift cards. While government regulation has cut down on some of these practices, it is important to fully understand all of the details of the gift card that you purchase.
Many stores and restaurants sell gift cards in their own retail space, but a new trend has emerged as of late. That is the ability to buy gift cards to a variety of retail stores and restaurants at your local grocery or drug store.
While this is quite convenient, that convenience does come at a cost. When you purchase a gift card at the store for which the card is issued, there is usually not a fee. When you purchase a gift card at a grocery or drug store, there almost always is a fee. The fee ranges between $4.95 and $8.95. While that may seem small price to pay, on a $50 gift card it is at least 10% of the gift card value.
Another type of gift card is one that features the logo of a major credit card company, such as Visa, MasterCard or American Express. The benefit of this type of card is that they can be used almost anywhere that major credit cards are accepted.
If you purchase a gift card with a Visa, MasterCard or American Express logo from a bank, you will probably not have to pay a fee. If you purchase one from a drug or grocery store, you will have to pay a fee similar to those for the retail and restaurant gift cards.
Both store credit cards and gift cards have their place. When applying for or purchasing such cards, it is important that you fully understand all fees, features and possible expiration dates.
Being well-informed will help ensure that you get the best deal and that you make the most of your store credit or gift card.
loading...
