Sometimes it’s tough stepping into a store without a sign (or even a person!) trying to sign you up for a credit card. So many stores have their own credit cards, and most of them have some kind of rewards program to lure you in. However, they also come with a slew of fine print (that you probably won’t read) high fees, high spending thresholds for introductory bonuses, and occasionally, deferred interest offers (these are bad).
Low Rewards When You Think About It
While some rewards may sound appealing at first, once you read the fine print they may not be as exciting as you expected. For example, a Macy’s Credit Card offers 20 percent back on purchases. Well, that sounds awesome! However, when you look closer at the fine print, you’ll read that this offer only applies for the first two days of opening up the credit card. On top of that, the savings is capped at $100, so you can only get the discount on $500 worth of merchandise. If you’re a big spender looking to really cash out, then you’re out of luck.
Another example is the Toys R’ Us Card. It offers 10 percent off, but that’s only on Thursdays! You can collect points with the card, but you need to spend a minimum of $125 to get a measly $5 back. While that’s technically 4 percent back which is ok, you have to remember that you’re required to drop all that money at Toys R Us. It’s not like you’re allowed to build up cash back over time while paying for groceries and gas.
High Interest Rates and Deferred Intro Offers
While some credit cards from banks and credit unions sometimes charge an appalling 20 percent APR, store-branded credit cards usually have them beat. Gamestop charges 27.99 percent, Staples charges 28.99 percent, and Zales goes up to a whopping 29.99 percent. The Zales card blows my mind because that’s a standard penalty APR. You get charged this if you cannot pay off a purchase within the allotted time.
Many cards also tout that they are ‘interest free’ during an introductory period. However, what is buried in the fine print is a different story. Sometimes, these cards actually offer deferred interest over the introductory period. With deferred interest, you aren’t charged anything over a certain period, but interest still accrues in the meantime. If you haven’t paid the balance off in a certain timeframe, then you’re liable to pay all of the interest that has accrued over that time period, even if there’s just a dollar left.
In-Store Use Only
Many store cards can only be used in that store, or more specifically, there is absolutely no reason to use them anywhere else besides their parent store. While this might not seem like a big deal (you were going to shop at Target anyway right?), it ties you to that retailer. Originally, they may have had the best deals or been go-to, but you might change your mind eventually. Your store card keeps you from searching for better deals.
In other cases, you can use your store card elsewhere, but there may be higher fees involved, and you most likely won’t be racking up any rewards points.
Store cards are designed to sucker you in to shopping exclusively at that store. They will pepper you with ‘deals’ and promotions to keep your attention, make it hard for you to spend elsewhere, and encourage you to build the habit of bee-lining to that store without shopping around.
Read the Fine Print
While most store cards seem like a great deal on the surface, the ugly terms and conditions are hiding in the fine print and hoping you won’t spot them. With higher rates, misleading rewards, and restricting your shopping choices, store cards are designed to train you to spend as much as possible with one retailer.