by Matt Frankel, CFP | Sept. 12, 2020
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Store credit cards are usually inferior to their traditional counterparts.
Store credit cards may seem like great deals at first. They often give new applicants a valuable coupon, and tend to have enticing interest-free financing deals.
However, store credit cards are typically not the great financial tools they are made out to be. They have major shortcomings that might make it smart to ditch your store credit card and use a traditional card for your next purchase.
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Store credit cards can be decent options if you want to take advantage of an interest-free financing offer, or if a store credit card offers a high rewards rate and you're going to pay off your purchases immediately. But there are major downsides to store credit cards you should be aware of.
To be fair, there are some situations where a store credit card makes sense. For example, although they are normally structured as deferred interest, store credit cards sometimes give you more time than traditional credit cards do before interest kicks in. In the interest of full disclosure, I recently used a store credit card at a major electronics retailer to buy a new TV because I got a 24-month interest-free period. Sure, the interest is technically deferred, but I plan to pay off the balance well before the two-year period expires. I've seen some store credit cards (especially at furniture stores) offer no-interest financing for as long as five years.
Furthermore, there are some store credit cards that offer competitive rewards and other perks. If this is the case, it can be worth using, but if and only if you are certain you'll pay it off before interest kicks in.
So while there are some cases where using a store credit card can make sense, it's important to be well aware of the drawbacks before you sign up.
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