How to use Store Cards Intelligently

Store cards have a bad reputation as the unsuspecting shopper can run up huge debts through the inflated interest rates they carry.  However, whilst store cards are not to be recommended to the impulsive spender who doesn’t pay the full balance off at the end of the month, they can actually be used by the savvy shopper to their own advantage. Store cards have high digit interest rates which can lead to problems, yet when store cards are used intelligently then they can have their advantages.

One of the main problems with store cards is that they are so easy to obtain that they can be easily swooped up by those who have little experience of dealing with credit wisely, just to get a discount at the checkout. The initial discount is the lure of store cards but it is usually only valid immediately, or until the next day.

If you are intending to buy things anyway then it makes sense to plan what you want and then take the discount for an amount which makes it worthwhile. If you have had your eye on a gorgeous winter coat which is a bit pricey, then open the card to coincide with the purchase, rather than waste it on a cheap item you just picked up on the spur of the moment.

Once you have made your saving you can then either pay off the full balance and close the account, being the proud owner of the coat you wanted with a nice 20% discount: or you can pay the balance off in full and retain the card in the hope of further discounts.

Store cards are very useful for their discounts if you have just moved house and will be spending money on decorating supplies and furnishings. However, never open the accounts prior to moving as this will show on your credit file at a vital time when you may be waiting for a mortgage offer, or having your credit file checked by a new landlord.

Unless the card offers future discounts you would be likely to use then it is not worth the bother of leaving the account open for rewards points generally. Some cards have the advantage of issuing invitations to previews which can be useful if those appeal to you. You could take a friend along and choose your purchases together and then your friend can open a card and receive the initial discount on both your purchases.

As store cards are so easy to obtain they are a good way of establishing credit for those who have no credit history, or for those with bad credit to work to improve their credit rating. However, they should be used intelligently, with any expenditure paid off in full when the bill arrives, otherwise the high interest rates will be applied to the balance. As with all forms of credit though, if you pay your store card late it will reflect negatively on your credit file.

Not all store cards are created equally and there are some which can be used in a wider variety of places than just the store which issues it. In these cases the points can sometimes be worth keeping and redeeming, but compare the store card reward scheme with one on a credit card as you may find a better deal.

Thus whilst store cards are in general a bad idea because of the reputation they have for high interest rates they can still work to your advantage if you use them intelligently. Fortunately you can’t get too carried away with excess expenditure as the credit limits are too low.