by Katerina Nikolas

Created on: August 05, 2010   Last Updated: August 23, 2010

Store cards are the rather disreputable cousins of credit cards, which don’t particularly enhance your financial reputation. They are often used as a way of establishing credit due to their ease of obtainment. The excessively high interest rates they carry should be a warning to stay well away unless you are a shopper with a strong sense of fiscal responsibility.  Unless you know how to use them to your own advantage they can be a nasty tool to dig a financial hole with.

Those who manage their finances responsibly and never carry a credit balance need not be deterred by the high interest rates which store cards have, as interest rates are immaterial without a balance. Store cards can be an advantage if you regularly shop in a particular store and using the card will give you a regular discount which equates to a bigger saving than the cash back on your usual credit card.

However it is worth considering if the item is worth paying the full price for even with a discount as you may well obtain the item much cheaper if you wait until the sales when the card discount will most likely not apply. If the discounts are of use to you along with the usual reward points it could well be sensible to carry a store card, particularly if you are prone to enjoy offers such as store previews.

Some store cards offer a very good introductory discount which may be their only plus point if previews and rewards points aren’t worth having. In such an instance the shopper should plan exactly what to buy to obtain the one off saving and then pay the balance off in full and close the account. If this is done occasionally with store cards in order to obtain good offers it will not have a detrimental impact on your credit score. However if you open many new cards together it will have a negative impact on your score.

The disadvantages of store cards are many to those who are not used to dealing with credit responsibly. In fact personal use of store cards is one of the main contributors to the rise in personal debt. Anyone who cannot treat a store card as outlined above should simply walk away from any offers. Those who do not clear their balances in full each month will find that the interest rate which is often equivalent to a penalty interest rate on standard credit cards will cost the user far more in interest payments than the amount of discount they received. Interest charges can equal the full amount of the minimum payment making it impossible

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