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Why Store Credit Cards Trap Consumers

Nearly every department store or chain retailer in the United States offers credit cards specific to their business, and it can be very tempting to take the bait of an instant 20% savings on your current purchase simply by signing up for and using a store card that very day. Store credit card offers are not only tempting in terms of the discount they offer, but they allow people the chance to make large purchases that they can pay off over time. To top it off, store credit cards are easy to apply for and obtain in a matter of minutes or even seconds. However, store cards can be very dangerous and cause serious credit and debt problems.

High Interest Rates

Store credit cards tend to carry extremely high interest rates that are often much higher than non-retail cards. Store credit cards often have interest rates of around 25% or even higher, making it extremely difficult to pay down higher balances.

When you apply for a store credit card, it happens right at the checkout counter. Your credit is run instantly, but your actual credit rating isn't necessarily even taken into consideration before a card is issued, so even someone with a very poor credit rating can still be given a credit card. This may sound wonderful at the time, but in reality, all it does is put cardholders in a position of getting themselves even deeper in debt. Despite the fact that they may not take your credit rating into consideration, that credit inquiry they ran on you does count as a hit against your credit score, and with each inquiry that is run, additional damage is done to your credit rating.

Retailers will issue a store card to just about everyone, so for many people, this is the only revolving credit available to them. Unfortunately, card holders with low credit scores or low incomes tend to use store cards without knowing how to manage their spending properly. This, in turn, sends them into unmanageable debt in the process.

Unless you are absolutely certain you will be able to pay the full balance every single month, a basic rule of thumb in maintaining good credit and staying out of debt is to avoid store credit cards altogether, no matter how tempting the offers that come along with it may be.

If store credit cards or other forms have debt have left you with unmanageable bills, we can help. Contact Advantage CCS for more information on credit counseling, budget management, and debt management solutions.