There are different types of credit cards and one of them are known as limited purpose cards. These are the cards that you can use for specific stores and purchases only. The most common type are gas and store cards.
Store credit cards allow you to purchase items or products with a specific merchant or establishment on credit. Most of the time, whoever issued the card will be the only merchant that you can use it on. While they can help make cashless transactions possible, there are other underlying disadvantages that could lead you to debt problems. This is probably why some people are torn when it comes to these because they are not sure if these retail cards are a good or bad idea.
4 ways you can avoid retail card debt
Well as far are being a credit card goes, it is a tempting purchasing tool to abuse but you can keep yourself from running into any store card debt if you know how to use it properly. There are certain tips that you can follow to make sure that you are practicing the right habits whenever you make purchases with this credit card.
Here are 4 tips that will keep you from encountering problems with these cards.
Avoid carrying over balances to the next month. If you want to keep the interest rate from bloating your expenses, you need to pay your balance in full at the end of the month. Among the other type of credit cards, these are the ones that has the highest interest rate. If you want to avoid this, you need buy with credit only what you can afford to pay in cash. The discount and privileges that comes with the card will be worthless if you let your balance be added with interest.
Find out the rewards and utilize them. We are not encouraging you to use your card just for the sake of availing the rewards. But if you will use the card for purchases, you have to see how you can incorporate the rewards and discounts on the card. This will help make your store credit cards worthwhile. Try to look beyond the discounts.
Know the details of your card. It is important to understand the fees that go along with your card. Are there annual fees? What is the credit limit? What are the penalties for late payments? These are all important details that you have to know so you can make smart spending choices whenever you use this card.
Select the right card. When you are choosing store credit cards, you can compare rates through online sites like Nerdwallet.com or Cardhub.com. But take care not to focus too much on the interest rate and discount. It is very important that you choose the card that will complement your spending lifestyle. Choose one or two store cards that you visit often and try to consolidate your purchases there. That way, you can maximize your use of the card.
Try not to own too much store credit cards. It can be difficult to monitor all of them and the chances of you utilizing all of them may not be possible. If you cannot use them and you only accumulate balance on them, you can get to serious trouble. Credit cards in general, are tempting to use. If you want to stay away from financial troubles, it is best to just keep them away in the first place.
Pros and cons of using store cards for purchases
Implementing smart spending tips can really be tested when you are using credit for purchases. There is a reason why people oftentimes compare buying with cash vs credit. There are too many things that can go wrong when you purchase using the latter.
But despite that, it pays to know the pros and cons of store credit cards. There are benefits to be gained – no matter how tainted the reputation may be.
Let us begin by discussing the advantages of using retail credit cards.
There is usually a sign up discount. This is the come on of merchants so their clients sign up for the cards. It is usually an immediate discount on what you purchased. The discount is around 10% of the regular price. Not only that, you can even combine it with the other promotions that are currently existing in store.
You get regular promos and discounts. There is usually a discount for most store credit cards. This is the encouragement that people get from the store itself. That way, they always use the card. Also, when you sign up for a card, the merchant has you on their mailing list and you can get news of sale events and even coupons.
Helps you establish a credit history. For beginners, store credit cards are helpful in getting a credit history. It is also not too strict to require a credit score from applicants.
You get to enjoy the cashless and immediate transaction. Like all credit cards, you get to enjoy cashless transactions but not only that, you can also save time by buying the purchase immediately. It is helpful when there are sale events that slashes the price of the items you want to buy.
Now that we have mentioned that, let us turn to the disadvantages.
There are high interest rates. If there is anything that should turn you off about these cards, it is the high interest rate. Make sure that you try to keep your balances from being carried over to the next month. That is how you avoid it.
Can harm your credit score. While this can help you establish your credit history, you must understand that using this card the wrong way can also ruin it for you.
It pays to really know how to utilize store credit cards so you can keep yourself from getting in debt and a future financial crisis. If you are responsible enough, then you should not be in danger at all.