189 million adults in the United States have at least one credit card.
While the total number of credit cards in the United States has gone down slowly since the early 2000s thanks to stricter lending laws, people’s reliance on “buying money” from banks is still very strong.
Among the most popular types of credit cards that are in circulation are easy to get store credit cards.
For the uninitiated, a store credit card is a product that’s offered to consumers upon checkout. Typically, a cashier will ask if you’re a store cardholder and will offer you an intensive to sign up if not.
While taking on a store credit card may seem harmless, that’s often not the case.
To help you make an informed decision on store credit cards, our team breaks down some of the pros and cons of signing up for one. Keep reading to find out!
The Downsides of Getting a Store Credit Card
We’re going to open up our easy to get store credit cards pros and cons list with their drawbacks. Here are a few things to consider when getting store cards that could hurt you.
Credit Inquiries Ding Your Credit Score
It’s important to know that store credit cards are just like general credit cards in the way that they operate. The first similarity you’ll be exposed to between store cards and general cards is that both will pull a credit inquiry in order to determine your eligibility.
While soft credit inquiries can have little to no impact on your credit score, hard inquiries can leave a black mark on your credit report that can bring down your score by multiple points.
Furthermore, it can take up to 2-years for hard inquiries to fall off of your report.
Store Cards Have Low Limits and High Utilization Rates
An interesting factor that hurts people’s credit is utilization rates. That term means the amount of available credit you’re using in comparison to the amount of credit you’re being offered.
It’s considered best practice by many financial experts to keep your credit utilization below 30% on any given card. That can be a serious challenge when it comes to easy to get store credit cards.
Store credit cards typically come with much lower credit limits than general use cards.
For example, if your general use card comes with a $5000 credit limit and you charge $1000 to it, you’re below the recommended use threshold. If your store card only has a $1000 limit and you charge $500 to that though, you’ve nearly used 50% of your available credit.
Approval on New Cards Can Hurt Credit History
The average amount of time you’ve had credit can have a serious impact on your credit score. The longer your average history is, the higher your score will be.
Whenever you add a new credit card, including a store card, to your credit portfolio, your average credit history will go down.
While effects should be nominal, your score will still likely drop by a few points.
Store Credit Card Incentives May Drive Up Spending and Delinquency
We’ve all told ourselves at one point or another that a store’s deals are “so good” that you’d be crazy not to buy.
With an easy-to-get store credit card, you may routinely be offered 10% to 30% off of your purchases. That deal may lead to you going numb to the total amount your spending.
High spending leads to falling behind on payments and payment delinquency leads to your credit score plummeting.
Be sure that you never let a good deal pull your focus away from what you can afford.
The Advantages of Getting a Store Credit Card
Getting a store credit card isn’t completely void of perks. Here are a few you might enjoy.
Easy Establishing of Credit History
Since store credit cards have low limits and lax approval standards, it may be possible to pick one up as your first credit card and start establishing a credit history.
It’s important to have some form of credit history to start building your reputation as a responsible borrower. Easy-to-get store credit cards can facilitate that.
Responsible Use Of Your Store Credit Card Will Boost Your Credit
If you’ve never had a credit card before, getting a general use card that has a $1000+ limit might be more pressure than you’re ready to handle. With a store credit card that comes equipped with a much lower limit, you set yourself up for success by reducing your chances of overextending yourself.
This will make meeting your payment obligations easier.
If You Shop at a Store a Lot and Pay Your Balance in Full Each Month, You’ll Save Big-Time
The biggest advantage of easy to get store credit cards are the incentives they offer. If you shop a lot at a particular store and pay your balance in full at the end of each month, you’ll get deep discounts and won’t ever owe your store anything in interest.
This can add a lot of money to your bottom line at the end of each month.
Wrapping Up How Easy to Get Store Credit Cards Affect Your Credit
As we’ve described above, there are a lot of negative and positive aspects to using easy to get store credit cards.
The most important thing to remember is that, like any credit card, you must use your store card responsibly and pay it back as quickly as possible for it to really be a good deal.
If you don’t, you’ll quickly surpass any discounts you’re offered by overbuying and overpaying in interest.
For more of the best credit related advice you can find online, check out additional content on Credit Repair Answers today!