Consumers who want to open a new credit card have a number of options to choose from. There is, however, one type of card that is quite popular but should be avoided if possible.
This is what it is.
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Avoid opening a credit card in store if you can
Store credit cards are the type of credit card most people should ignore. Store cards are issued by retail stores and are often offered to customers when they go to checkout. Stores may even offer a special incentive, such as 10% or 15% off the first purchase made when opening a credit card in the store.
While these types of offers may sound like tempting, the reality is that store cards are generally one of the worst types of credit cards to open for a few key reasons.
High interest rates
First of all, store cards often have very high interest rates. Most cards have a high interest rate, especially compared to more affordable debt, such as personal loans or mortgages. But while a typical card may have an interest rate of around 16% or 17%, store cards often have rates of 24% or more.
This additional interest may result in a balance on store cards. really expensive, so anyone who thinks there’s even a chance they won’t pay off their balance in full each month should absolutely avoid a store card if they can.
In addition, store cards generally do not offer promotional rates, unlike many other cards, which can make using a credit card more affordable. For example, there are 0% interest credit cards that offer a 0% promotional rate for about a year, which can give people time to pay for their purchases. But store cards usually start charging interest immediately once a balance is not fully paid by the due date.
Bad rewards programs
The second big reason store cards should probably be avoided is that rewards programs are often not very good.
In most cases, you can only earn rewards when shopping at the store that issues the card. So it can take a long time to collect enough rewards. Or you could end up spending too much money at the store in an effort to earn rewards.
When you earn rewards, you often have to spend more money in that store to redeem them. It’s really different from cash back credit cards or other cards that earn points or miles and have more flexibility for redemption.
Since you will likely end up paying more for a store card and the rewards you will earn will be worse, there is very little reason to get this type of card. Instead, look around and compare credit cards that offer an affordable rate, the cardholder benefits you’ll enjoy, and the potential to earn bonuses on the different types of spending you make the most. You will probably end up being much happier with this type of card.