11 Oct Budget Bolstering Benefits
Just about every time a customer walks up to a register to make a purchase a store credit card is offered or recommended. “Would you like to save 15% by applying for our store card and earn an extra $20 off of your purchase today?” A common line of questioning for any adult making regular purchases in retail stores. But, is a store credit card a good idea?
Before we consider the value of the credit card itself, let’s think a little bit about what store representative is asking you to do. Without planning ahead or thinking it over in advance, the question asks you to make a split second decision that will have a lasting effect on your credit and therefore your future.
A new credit account not only has an impact on your credit score but also opens up another avenue for you to go into debt. Retail store cards, specifically, have been known for certain disadvantages along with the obvious advantages that some other types of general purpose credit cards may not have. Let’s consider a few of the ways your budget may benefit from this new opportunity.
More often than not, retail store credit cards are packaged nicely with promotions and other perks. For example, some retail stores will offer certain percentage discounts to it’s shoppers simply for using the store credit card to pay for merchandise. In addition to the initial discount, some store credit cards offer continuous discounts as well as exclusive shopping days and other rewards like returns without a receipt, free gift wrapping, complimentary alterations, and even gift certificates aimed at attracting and rewarding the frequent shoppers.
One way to enjoy some of the benefits of being a retail store credit card holder and take advantage of many of the sales and promotions offered is by simply signing up for the store’s newsletter via email. The quickest and easiest way to get yourself added to such mailing lists is to simply ask a sales associate if there is a mailing list and if you can be added?
Some retail store cards carry a MasterCard, Visa, American Express or Discover card logo. These cards are more than just basic retail store credit cards. These cards can be used in other establishments that accept these brands. This provides flexibility to the spender which can be a good or a bad thing depending on the shoppers level of financial responsibility. Some of the reward programs and incentives for these major brands go far beyond the retails store. In some cases points can even be redeemed in exchange for round-trip airfare. Best of all, some retail store credit cards even promise a cash back reward on purchases that meet certain criteria.
Aside from simply soaking in the many Pros, when selecting or “shopping” for a retail store card be sure to compare each card carefully to ensure that you will receive the maximum number of points to fit your lifestyle.
Do Retail Credit Cards Help Me Build My Credit?
I’m so glad you asked! If you’re looking to rebuild or establish a credit history you may find a friend in retail store credit cards. Because of their less rigid requirements, retail stores have been known for being more forgiving when it comes to credit history. As a tool for building your credit history, retail cards can be heavenly. This is, of course, with the understanding that you will keep the balance at a minimum or not carry a balance at all.
Retail store credit cards can be much easier to qualify for than co-branded credit cards due the price for risk. More simply put, shoppers with higher credit scores will be offered lower interest rates. Taking all of this into consideration, the long term result of managing a store card well can add points to your credit score. The best way to manage retail cards is to use them sparingly, keep your monthly balance very low to minimize your debt-to-income ratio which makes up about 30% of your credit score.
One final consideration for lenders is inflation. Economic changes cause prices to rise. For example, if a grocer pays a farmer $10.00 for a crate of apples and sells them at $2.00 per bag for a profit, he can not reasonably pay $20.00 for the same crate of apples and expect to make a profit selling them at the same $2.00 per bag. If the grocer’s cost increases, he must pass that cost on to his customers in order to stay in business. This principle, known as inflation, applies to every industry including the financial industry. Lenders also factor in what impact they expect inflation to have in the future in order to determine what your interest rate will be.
Shopping around is the best strategy when it comes to finding the best interest rate. You may not be able to influence what factors the lender will consider but you can absolutely ask for lower interest rates than what you are offered. Try to negotiate and remember that banks, credit unions, government lending, mortgage companies, and even payday loans as a short term alternative may be good options. To optimize your chances of being offered lower rates in the future be sure to make your payments on time!