Without a doubt, the biggest thing to watch out for before using a store credit card is a feature called deferred interest, which is used by nearly half of the major retailers that offer financing. A deferred-interest store card will usually try to hook you with a 0% intro rate while hiding the fact that such a rate is far from guaranteed. If you pay your bill a day late or leave a $1 balance unpaid at the end of the 0% promotional period, the credit card company will go back and assess interest to your entire original purchase amount like the 0% deal never existed. In other words, you could wake up to a big bill instead of savings if you err in the slightest. So stick with general-consumer 0% credit cards for big-ticket purchases because they don’t use deferred interest.
It’s doubly important that you avoid store-card financing considering that many offers make you choose between rewards and a promotional interest rate. Rewards are what you really want from a store credit card. With that in mind, you should also make sure to check how much a card’s points or miles are worth, if it doesn’t offer cash back. For example, you might discover that 5 points from one card are worth more than 10 points from another.
Finally, it’s a good idea to confirm that your credit standing qualifies you for approval. Store credit cards tend to have fairly lenient approval requirements, compared to general-consumer cards with similar terms, but you’ll have a hard time getting one if you have bad credit. In that case, we recommend getting a secured credit card with no annual fee, using it responsibly and graduating to a store credit card when you improve to at least fair credit. You can track your progress for free on WalletHub, thanks to daily credit score updates and personalized credit-improvement advice.
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