Three Mistakes to Avoid With Retail Credit Cards

By  //  April 22, 2022

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Retail credit cards are great for those who shop at a few dedicated stores and want those VIP perks those stores offer their credit clients. However, it’s easy to get caught up in the “perks” of your purchases and forget about the financial impact. With that in mind, below are three financial mistakes you should avoid when using retail credit cards.

What is a retail credit card?

Retail credit cards are cards used at one or a few specific stores. They’re also known as “Department Store Cards” and rarely can be used anywhere but the store to which it’s attached. Sometimes a large corporation will own multiple brands and allow their retail cards to be used at any of their stores, though it varies based on their terms and conditions.

Retail cards can be useful for sign-up bonuses but are rarely a good idea to keep for the long-term since they provide fewer benefits than major credit cards. Consequently, if you have outstanding debt on these retail cards, consider looking into debt consolidation loans to streamline your debt pay-off strategy.

But why are they rarely a good idea? Here are a few common mistakes people make with retail cards.

Mistake 1: Not exploring major credit cards instead

Retail store cards typically have a sign-up bonus that includes a discount on your first purchase, which seems like a tempting deal for big-ticket items. However, consider exploring the benefits of a major credit card from brands like American Express, Visa, or Mastercard because they’ll often have member rewards or automatically extend your purchase’s warranty. In the end, that 10% off might be more expensive than the cashback or reward points you could’ve had using a major card instead.

Mistakes 2: Not paying off your balances in full

Whether you’re using a retail or major credit card, carrying balances over every month only increases the price of the things you’ve bought. Retail cards, however, typically have higher interest rates and can charge as much as 25% – 30% interest. If you carry a balance over three or four months, you’ve doubled the price paid for your past purchases.

Mistake 3: Spending money impulsively

By signing up for a department store card, you’re allowing your information to be put on their marketing lists. You should expect to receive mails and emails around “exclusive” coupons and sales or friends and family events, both of which are designed solely to get you to put more money on the card by buying more things. That way, they’ll reap the double benefit of getting you to buy their products and charging you interest if you don’t pay them off quickly.

The bottom line

If you’re looking to take advantage of some of the perks these cards offer for sign-up bonuses and exclusive events, you can do so responsibly and stay out of debt. By avoiding the three mistakes outlined above, you can ensure that your finances remain in order while supporting the stores you love.