This Is the Worst Kind of Credit Card for Most Consumers

by Christy Bieber | Published on Oct. 3, 2021

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A woman handing her credit card to the cashier behind the counter in a clothing store.

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Try to avoid this type of card when deciding which credit card to open.

Consumers looking to open a new credit card have a lot of different options to choose from. There's one type of card, though, that's pretty popular but should be avoided if possible.

Here's what it is.

Avoid opening a store credit card if you can

Store credit cards are the type of credit card that most people should skip. Store cards are issued by retail stores, and customers are often offered them when they check out at the cash register. Stores may even offer a special incentive, such as 10% or 15% off the first purchase made when a store credit card is opened.

While these types of offers may seem enticing, the reality is that store cards are generally one of the absolute worst kinds of credit cards to open for a few key reasons.

High interest rates

First and foremost, store cards often have really high interest rates. Most cards have a high rate of interest, especially compared to more affordable debts, such as personal loans or mortgages. But while a typical card might have an interest rate of around 16% or 17%, store cards often have rates of 24% or more.

This extra interest can make carrying a balance on store cards really expensive, so anyone who thinks there's even a chance they might not pay off their balance in full each month should definitely avoid a store card if they can.

Also, store cards don't generally offer promotional rates, which many other cards do and which can make using a credit card more affordable. For example, there are some 0% interest credit cards out there that provide a 0% promotional rate for a year or so -- which can give people time to pay off purchases. But store cards usually start charging interest right away once a balance isn't paid in full by the due date.

Poor rewards programs

The second big reason store cards should likely be avoided is because the rewards programs often aren't very good.

In most cases, you can only earn rewards when you shop at the store issuing the card -- so it could take a very long time to amass enough rewards. Or you could end up overspending at the store in an effort to earn rewards.

When you do earn rewards, you're often required to spend more money at that store to redeem them. This is really different from cash back credit cards or other cards that earn points or miles that provide more flexibility for redemption.

Since you'll likely end up paying more for a store card and the rewards you earn will be worse, there's very little reason to ever get this type of card. Instead, look around and compare credit cards that offer an affordable rate, cardholder perks that you'll take advantage of, and the opportunity to earn bonus rewards on the different types of spending that you do the most. You'll probably end up a lot happier with this kind of card in the end.

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