What Are Store Credit Cards?

A lot of retail giants offer ‘Store Credit Cards’. Store Credit Cards are different to co-branded credit cards. Co-branded credit cards can be used outside of the retail store that offers the credit card. These cards are just like any other credit card - example Woolworths-HSBC Master Card. Store Credit Cards on the other hand cannot be used outside of the retail store that offers the card. Example - David Jones Card.

Reasons Why Store Credit Cards Are Tempting

Discounts and special offers to card holders Invitations to special promotions and events - like a fashion show Huge Interest free periods for certain purchases

Pitfalls Of Store Credit Cards

• A much higher interest rate than the normal credit cards
• Some of these stores offer up to 5 years of interest free options - sounds good doesn’t it - but hang on, here comes the trap - you have to make a minimum purchase (usually around 500 dollars). Now, just to make use of this interest free option, I am quite sure many will be tempted to make a purchase for minimum amount and above - even if you have no real need for the purchases you are making.
• Check out the interest free period terms - there can be some huge charges if you default on any payments
• Specials for store card holders - again by constantly bombarding you with catalogs for these specials, these stores are tempting you to buy - why should you buy things you don’t really need.
• The prices charged in the retail store that is offering the card might not necessarily be the best deal anyway…You don’t want to end up paying a premium, just for the advantage of using the store card.
• This is the biggie for me - you are tied to that one store.

How You Can Make Store Cards Work For you

• If you are not an impulse buyer and are careful with your purchases, then you can really make these cards work for you.
• If you can exercise discipline with your purchases
• No establishment fees and annual fees.
• Pay off all payments due within the date due
• Should have a reasonable amount of interest free period
• If it comes with ATM facility, don’t use it.
• Make sure that the interest rate is not high and is in line with market rates
• And finally, don’t sign up a card from a store where the prices are at a premium…You will end up paying a higher price for a product, just for the privilege of using the card.

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