By William Frazier
June 7, 2015
Getting a store credit card comes with obvious surface level benefits which are the reasons most people sign up for them. Purchase discounts, increased spending potential, rewards and not having to see the cash leave your pocket right away are all things at the tip of the iceberg that get consumers attention. However, just like the iceberg that sunk the titanic, there are bigger consequences hidden under the surface after you sign up for the card.
Let me start by saying getting a store credit card is a great thing to do if you need to quickly start building credit to purchase a home or something like that. They are normally easier to get approved for than some other forms of credit and you normally get pretty decent amounts for credit limits which can significantly help your score. Just one card used properly can help you improve 65% of your score (35% payment history & 30% available credit).
One of the bad things that come with having a store credit card is temptation. If the card is for a store that you love you will likely spend more than you need to and dramatically bring down the amount of available credit on your credit report that was a reason to celebrate having the card in the beginning. Normally anything you use past 30% of your credit limit will gradually start to bring your score down. Also, overspending on the card can lead to late payments if you didn’t properly plan out how you were going to pay back the purchases over time.
The other issue with store credit cards is that once you stop using them for a few months they normally close. So why is that a big deal? Well, whenever a credit card closes it hurts your credit score. The benefit of having revolving credit is the lower your balance on that open line the more points you get to boost that 30% area of your credit score. Once the card closes that money that was available to you closes with it so you lose all those points you were given.
So depending on your situation a store credit card can be a good thing to have. You just need to make sure you spend responsibly with it and plan on using it fairly consistently over time to maximize your credit score.
In Need of Some Good Credit Card Options for Building Credit? Visit 850mindset.com and try the “Open Sky Card“
William Frazier
NACC Certified Credit Counsilor
Clean Slate Credit
334-430-5296
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