There are several mistakes that people often make while using store credit cards, and these pitfalls could end up costing you a chunk of change if you’re not careful. If you avoid these mistakes, store credit cards can save you money at your favorite retailers, thanks to rewards or 0% interest promotions.
Forgetting to Check Your Credit Score First
Store credit cards generally require fair credit or better for approval. Before you submit an application, take the time to check your credit score for free to make sure you meet the lender’s minimum requirements.
Applying if You Will Save Less than $100 the First Year
Store credit cards often appear attractive because of their $0 annual fees and the fact that they’re presented at checkout as a way to save. This can make it tempting to apply too often, so using the $100 rule can help you decide when to pass on the offer.
You could be better off applying for a rewards card that you will be able to use anywhere. There are a few good general-purpose rewards cards for people with fair credit (the same credit level you’ll need to qualify for most store cards) and lots for people with good or excellent credit.
Falling Into the Trap of Deferred Interest
Store credit cards that offer 0% APR promotions tend to use a deferred interest structure. For a certain amount of time, you don’t owe any interest on your purchases. However, if you haven’t paid them off in full by the end of the promotional period, you’ll owe all of the interest you would have accrued during that period, calculated based on the card’s regular APR.
It isn’t necessarily a bad idea to get a card with deferred interest, as it can still save you a lot of money on big-ticket purchases. It’s just a mistake to not pay everything in full by the end of the introductory period.
Failing to Redeem Rewards Before They Expire
The rules for rewards expiration will differ from card to card. On some cards, rewards may never expire. On others, they may expire a certain amount of time after they’re earned, or after a certain period of account inactivity (no purchases or payments). Redeeming rewards may also sometimes count toward card activity.
Before you apply for a rewards card, it’s a good idea to read the fine print and find out whether rewards expire. But even if they don’t, it’s a good idea to redeem your rewards frequently to protect yourself against devaluation. If you have a credit card that offers points or miles, the issuer can change the value of each point or mile at any time.
Not Taking Advantage of Bonuses & First-Purchase Discounts
Some store credit cards will offer bonus rewards or a discount for either spending a certain amount of money within the first few months after account opening or making an initial purchase. These bonuses are usually relatively easy to earn if you shop at the retailer frequently. Just make sure to meet any spending requirement within the time limit, as long as that doesn’t cause you to overspend by more than the bonus is worth.
Not Having a General-Purpose Rewards Card
Store credit cards will often give you better value when shopping at an individual retailer than a non-branded rewards card. But since store credit cards can only be used at the associated merchant, you should also have a general-purpose rewards card to use for other types of purchases.
You can even consider having multiple rewards cards in your wallet – one for your favorite retailer, one for everyday purchases and one for travel, for example. Just space out your applications. One per year is ideal.
There are also cards that are co-branded with certain retailers and give you the same types of advantages as a store card. The difference is that they are actually on a credit card network and can be used anywhere that network is accepted.
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