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The pros and cons of in-store credit cards

Yes, you can save money on your initial purchase and you may get coupons in the future, but you need to know what else is included.

GREENSBORO, N.C. — It's going to happen. You're going to go shopping, you'll get to the register and the person will say, “would you like to save money by opening up a store credit card?”

I mean, of course, you want to save money, but is opening a store credit card worth it?

“The check-out is not the place where you should make a decision about any new credit,” said Nathan Grant of Moneytips.com

With that said, there are pros and cons to store credit cards.

STORE CREDIT CARD PROS:


Store credit cards are a good way to start credit if you don't have credit. The approval terms are more lenient, you won’t have a high limit to be responsible for.
If this is a store you will regularly shop at, it can bring other coupons and savings. 

STORE CREDIT CARD CONS:


Store credit cards usually have a higher-than-average interest rate.
Store credit cards often have deferred interest financing which can be a selling point on a big-ticket item.

“The deferred interest, even if you just have a penny left on the initial balance when the promotional period ends, you're going to get charged on the interest from the entire full starting amount,” said Grant.

Opening up another credit card can also make a temporary impact on your credit score. So-, before you get to this point, decide now how you want to answer the question at the register.

MoneyTips.com explains open and closed loop cards:

There are two basic types of store credit cards. They are sometimes referred to as:

  • Open-loop cards: These cards can be used anywhere and have the Visa, Mastercard, American Express, or Discover logo at the bottom right of the card.
  • Closed-loop cards: These cards can only be used with the co-branded merchant and sometimes with affiliates. There is no Visa or Mastercard logo.

   

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