New Blog Post: Should You Use Retail/Store Credit Cards?

Good article, but I have to disagree with this:

How to do it right
If you do get a store card, pick one or two and no more to apply for. Use the card sparingly and pay it off every month. And don't charge more than 10% of your credit limit, even if you always pay the balance.

The author says "Store cards tend to have very low limits." ...and uses a $500CL as an example. The problem is that there are many stores with 'store cards' in which some merchandise easily exceeds 10% of such a limit. Therefore, using this logic in such a store, the card is useless. I do not agree with not charging more than 10% of your CL, even if you always pay the balance, because what the author fails to mention is that if the consumer determines what time of the month the creditor reports to the CRAs, the consumer can easily charge 50% or more, reap the benefits of using the store card, and pay it down to 10% (or off) before the card reports again thereby eliminating any hit to the consumers credit score with high utilization reporting.

Also, I would think creditors are less likely to hand out decent CLI's if the consumer is barely using the existing line. Why would someone want a $1k line increased when they've never charged more than $100 a month? Charging up a credit card, making multiple payments throughout the month, demonstrates that the consumer understands how to use credit, and the CLI could not only benefit the consumer but the store too with possibly further purchasing.

 

Good post mindcrime. My question would be if your credit is good enough for a Discover or Citibank Thank you card why would you want a store credit card? If you can purchase a big ticket item such as a TV or refrigerator and pay it off before incurring any interest charge why would you want a store card? I find that you can (usually.. not always) negotiate a discount on an appliance without using a store card. Also too if a consumer reads the fine print on their promotional purchase they should never have to pay deferred interest... except in the case of maybe a loss of a job or illness. Just my 2 pennies.

 

Thanks mijd.

Depends on the store, I suppose.

Some have great incentives when first opening the card but lack anything (much) down the line. Some (Target comes to mind) offer 5% off of everything in the store on an ongoing basis; depending on the V/M/A/D card the consumer has, they may or may not see the same rewards/return on their existing card.

I agree that in bonafide appliance store a savvy consumer can very possibly negotiate better terms on their own than with a tag price and store card, but store cards are everywhere these days, and for the most part prices aren't negotiable in these places and anyone who has been to Target, for instance, knows its very easy to walk out of there spending $100+, and both from personal experience and what I've read, CL's usually aren't that high, and a $100 purchase can easily exceed the 10% limit the author was referring to.