Why Store Credit Cards Might Be a Bad Idea

Image of a man in distressA store credit card can seem like a great option for shoppers who frequent certain stores. What is the harm in getting additional credit, when you will make the money back through the awesome discounts the store salespeople are offering, right? The reality is, most people will lose more money than they will gain by signing up for a store credit card.

How Do Store Credit Cards Cause Debt?

  • Easily obtainable: Store credit cards are often issued to people with financial troubles who may not even qualify for a regular credit card. Retail associates may not be trained in explaining the true extend of the financial burden that the card entails. This causes serious debt problems for those who are already financially vulnerable. Many retailers may not even check a borrower’s credit history.
  • Excessively high interest: The majority of store credit cards charge an interest rate on purchases that is very high, almost 30 percent in some cases. This is much higher than average interest rates.
  • Inappropriate loyalty: These credit cards encourage you to only spend at their stores, but with their interest rates they are making more and more money from your purchases, while you are losing more money than you would with a regular credit card!

These practices are very damaging to the finances of many people. However, many credit cards can contain positive features that many owners may not even know about.

Positive Credit Card Features That Will Help You Save

  • Reward points: Many credit cards include reward points for purchases which can include cash back and free airline miles. These awards can be obtained without any cost when your balance is paid in full.
  • Price protection: If you purchase something and notice the price drops soon, many cards will reimburse you for the change in price.
  • Event insurance: Having to cancel plans to go to a concert due to unforeseen circumstances can be a bummer. However, many credit cards have embedded event insurance reimbursement if you have to cancel a concert or other event.

Credit cards can be a good or bad thing. However, whenever you are taking on debt, it is important to review your loan terms and double check that your lender is not adding in additional fees or interest rates that you were not aware of. In some cases, lenders are guilty of illegal lending practices causing people to pile on debt. Consulting a Washington, D.C. debt management attorney can help review your finances to make sure you are treated fairly by creditors.



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