Store Credit Cards Pros & Cons

Who isn't looking to save money any way they can these days? Applying for a store credit card can save you plenty on a first purchase or a big purchase.

But Consumer Reports Money Adviser says you have to "shop" carefully to get a good card.

You browse, you decide, and when you're ready to pay you're offered a 15% discount, or 20 dollars back right away, or free shipping. How? by applying for a store credit card.

But Consumer Reports Money Adviser says resits the urge to immediately say "Yes!"

Greg Daugherty of Consumer Reports says, "Some of the biggest stores like Bloomingdale's, Macy's, and Sears charge around 25% interest on unpaid balances. That's about twice the average you'd pay with a traditional bank credit card."

Carefully look over cash back and rewards offers, too. Walmart touts one percent cash back on all purchases. But in small type there's a big red flag-you have to spend $3,000 a year before you get the full one percent cash back.

But Consumer Reports did find stores whose cards offer very good cash-back terms.

At L.L. Bean you can get three percent back. The money comes in store coupons that you have a year to use.

Even better, Target's credit card gives five percent back right at the checkout.

Daugherty says, "Stores like Target and Nordstrom offer a different kind of plastic-debit cards. These take money directly from your bank account. But if you overdraw, you can be hit with hefty fees, so they're not for everybody."

But for big purchases, do consider another type of store card from electronics and home stores like Apple, Best Buy, Lowe's and The Home Depot.

These generally offer six months to a year financing with no interest for big-ticket items.

However, pay the balance on time or interest will be charged retroactively.

Daugherty says, "Store cards can have both good and bad effects on your credit. They're generally easier to get than bank cards so they can help you build a credit history. But if you acquire too many at once, that can hurt your credit score."

Bottom line, choose carefully and a store credit can be a real perk.

Many stores also offer credit cards that are branded American Express, MasterCard, or Visa. These allow you to get rewards for your purchases at other stores, too.

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