Do you apply for, and use, department store credit cards? Do you think there are any advantages or disadvantages to using them?
Some of the disadvantages really only apply to people who are unable to pay their amount owing in full each month. Why? Because most often department store credit cards charge very high interest rates and if you simply make the minimum payments each month your purchase will quickly cost you double what you actually paid for it.
Department store credit cards are great for someone that needs to improve their credit score. Quite often it is easier to be approved for a new card from them then it is from a major financial institution. So if your credit score is really low or if at some point you declared bankruptcy, you may want to apply for a card from one of your local department stores.
Over the past several years department stores have come up with lots of great incentives to encourage people to use their credit cards more often.
Some stores offer a 5 or 10% discount on your purchases if you pay using your store credit card. This is wonderful for people that shop at the same store on a regular basis.
Others, such as Home Depot, offer 0% financing for six months if you purchase an item that costs $299.00 or more.
I’ve been to stores that actually offer 0% financing for one year on certain purchases.
The disadvantage to the upfront interest free financing is that if the end of the term comes up and you still owe money you will typically be charged a very high interest rate on the outstanding balance. To avoid that situation, make sure that during the 6 or 12 months of 0% interest that you still make monthly payments so that your balance owing is zero before the term expires.
Instead of offering a percentage off of your purchase, some stores such as the Gap offer you reward points.
So the question is; should you use department store credit cards? Personally, I only have two department store credit cards. One for Sears and one for Home Depot. The reason is because when I purchase big items for our house it is usually from one of those stores and l like to take advantage of the 0% financing.
Everyone of course is different, but my suggestion is to only carry a few for stores that you shop at most often. That way you can manage them better with the intention of avoiding their high interest charges.