Pro's & Con's of Store-Branded Credit Cards

I am mom to 3 school age kids and over the past month we went on our annual back to school shopping trip. This included visits to at least 10 stores. In every one of the stores where we made a purchase, something inevitable was asked: “Do you want to save 15% on your purchase today?” To which I replied—before they could finish the sentence – “No, thank you!”. So, should I have said “yes” to save money, or should I have said “no” to save my credit? Let’s talk about the pros and cons of each.

The Pros:

By holding a store-branded credit card, you earn points (incentives or rewards), usually redeemable at that store. With some cards, you can earn from all purchases, anywhere, not just those made at that particular store. This may result in earning rewards you will actually use, unlike some credit card rewards. Another pro is, as a card-holder, you are much more likely to receive additional perks, such as special sales or exclusive coupons.

The Cons:

First, anytime you do not pay off a credit card balance within the statement period and interest is charged, you lose. Often store branded cards charge the highest interest rate percentage. If there is any chance of this based on your situation, the answer is always no, do not get the card! If you open a store credit card simply to receive a percentage off one time but it isn't a store you frequent often, it can result in lowering your credit score.  This is due to having open credit accounts with no activity. A store card can potentially cause you to overspend if you're not careful. This is especially true if you're offered an incentive to spend a certain amount, to reach a specific level or earn a discount.

You are the best judge to know if it’s the right decision for you! Teaching your kids and grandkids about these card offers is important. Often, this type of credit card is the first kids are introduced to when they head off to college.

Information in this material is for general information only and not intended as investment, tax or legal advice. Please consult the appropriate professionals for specific information regarding your individual situation prior to making any financial decision.

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