Visa MasterCard Discovery

Few reasons to say no to store credit cards

[Monday, November 22nd, 2010]

Store credit cards are responsible for as much as 13 billion dollars in the retail sales every year. These cards are usually offered with a 20% or 30% discount on all the day purchases on the card and also guarantees future discounts on purchases too. Some of the store cards are even offering 0% APR for a stipulated period of time on all the purchases over a certain amount. However, there are a lot of other reasons why going for these store credit cards is not really worthwhile.

The first reason is that opening a new credit card account itself doesn’t auger well for your credit score. Apart from that you need to consider the fine print on the credit card. The fine print is always dangerous because there would always be terms and regulations mentioned there, which will limit the benefits you get and extend some of the penalties. For example, while the card promised discounts, it is the fine print which might say that this discount is only on some select items or those in a certain price limit. In other cases the discount might apply only on certain conditions which are very difficult to be met. A good example is when you charge at least 1000 dollars in the first 6 months or so. If you miss these parameters, you may not receive a discount at all.

Another important thing to note is the interest rate that you are receiving from the card. The interest rates on the store credit cards are usually very high. For example, the Chase Amazon Visa levies an interest rate ranging between 18.99% and 29.99%. The introductory period parameter is another ambiguous case in most credit cards. Even if you are promised a 0% APR, the introductory period for these interest rates may be a lot less than you might anticipate. In fact in some cases it could be as low as 3 months which isn’t good enough in any way. This also proves dangerous because if you haven’t paid your balance in full, the retailers keep the right of applying the interest to the total balance, not just the current balance along. This means you end up paying interest on the total amount that you had charged over the introductory period. All these terms are quite tricky, and it really needs a good, deep look before one can understand what the real terms are.

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