5 Pitfalls of Store-Branded Credit Cards

In most cases, store-branded cards deliver on their promise by rewarding loyal customers, but there are also a few things to watch for.

store branded credit card

Chances are you have been offered a store-branded credit card for quite a few times. It is hard to avoid these offers, and sometimes it makes sense to get such card for yourself.

We think it is perfectly reasonable to get something back from a store you are frequently buying from. That’s also the general rule to follow — only get a store-branded credit card for stores you actually visit on a regular basis. Otherwise, why bother?

But beware, cause there are some pitfalls — which we’re discussing in this article. Read on for details.

1. High interest rates

Store credit cards are notorious for their high interest rates and are thus best used when you can pay your balance in full, every single time. Otherwise, you could be slapped with an APR that goes up to 30% which is nothing but outrageous.

In other words, if you can’t pay off the balance at the end of the month, don’t get a store-branded card. Or don’t use it if you already have one. It’s that simple, yet extremely important.

2. Limited acceptance

For one reason or another, there are still some stores offering cards that work exclusively in their own stores. Or, a little bit better, their stores plus a few partner stores.

They want to keep you as their own customer, but are you willing to own a card that can be used with one retailer only?

Luckily, most merchants today offer co-branded cards that are typically either Visa or MasterCard, which you can use wherever these two are accepted — which means just about anywhere.

3. Limited rewards

You will have to read the fine-print and do some basic math. For instance, you may have seen a card offering 6 points per dollar spent in their store.

If we were talking about regular credit cards where 1 point tends to be equal 1 cent, this would mean that you get 6% back on your purchases. However, that fine-print may hide the real value of these points, with some stores valuing their points way below one cent — i.e. there were examples that 5,000 points get you a gift card worth $25. This means that one point is worth half a cent.

So make sure to (re)read the details before putting your signature on that contract.

4. Deferred interest

This one could get you in real trouble if you don’t pay your balances in full at the end of the month (which we suggest you do).

You may have seen some cards being advertised to offer “0% APR on purchases for 12 months,” which is ok. In contrast, a deferred interest offer will say “no interest IF paid in full within 12 months.”

So IF you don’t pay what you owe within 12 months, you will be slapped with high APR and perhaps even be hit with retroactive interest charges.

5. Store closures

This wasn’t the problem a few years ago but now in the “age of Amazon,” everything is possible. Simply put, the online retail giant — which at one point was a trillion dollar company — makes regular appearances in many retailers’ nightmares. Amazon may not just offer lower prices, it could now open a physical location near them and potentially ruin their business.

So what happens to the credit card once the store is closed? You will no longer be able to use it — though have no doubts about it, you will still have to pay what you owe. Someone will buy that debt and make sure you pay every single cent back.

Nonetheless, you don’t want to be stuck with the card that isn’t worth the plastic it’s printed on.

Now you know all the major pitfalls, but don’t forget the benefits. You will get to earn something back on every dollar spent in your favorite store(s) and also potentially benefit from special deals. As long as you’re using that card in a responsible manner, you’re good to go.

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