What Are Retailer's Credit Cards? Why Do You Need Them?
Everywhere you go, we see ads screaming at us to take on this credit card or that credit card. The ads scream at us, "0% down, no interest for three years!"
Are these retailer's credit cards the great deals that they appear to be? Let's have a closer look at exactly how these credit cards work.
First of all, yes, it's really true that a retailer's credit card will usually give you 0% interest, no payments for two years as an example, usually for a specific type of purchase. For example, let's say you sign on for a retailer's credit card at a furniture store. Now, because you signed on for this card, you might get 10% off your purchase price, plus you get 0% down and 0% interest with no payments for the next two years.
This is a great deal, with one caveat. If you don't completely pay off this retailer's credit card within those two years, you'll be charged interest on the purchase ? not just from the day that this no payments period runs out, but retroactively. The interest will probably also be compounded every thirty days over that two years; this can really add up.
So, you have to be careful here. If you want to use one of these retailers' credit cards, you have to be willing to be very, very conscientious and pay off the balance on that credit card before your introductory "special" period ends. If you don't, you're going to be paying a lot more for that purchase than you intended to -- and here's the thing; a lot of times, retailers' credit card interest rates are HIGHER than those of your traditional Visa or MasterCard. Therefore, you're also going to be hit with a higher interest rate for those purchases.
If you're not at all sure you're going to be able to pay for the purchase in full before the introductory period ends, don't do it. Now, of course, the best scenario is not to get into debt with these types of purchases at all and instead pay cash for things you really want or need. However, if you must use credit to make this type of purchase, a better bet may be to use a lower interest rate but "generic" credit card such as Visa or MasterCard, and pay down your purchases as soon as possible. Even though you won't save a percentage of the sale price as the retailer might promise you to get you to sign up for the card (such as 10% off if you purchase with the retailer's card), you'll save money in the long run because you'll be paying lower interest rates.
If the retailer's credit card in question is from a shop where you are a regular and you know that you can afford to pay the entire balance before the end of the introductory period, then these cards can be a good deal for you. If not, then you would be well advised to avoid these retailer's credit cards. Those retroactive interest charges can really hurt you otherwise. Make sure you can afford to quickly repay the balance before you sign up for anything.
Last of all; remember that no matter what kind of credit card you use, you'll pay a lot of money in interest if you aren't careful with your purchases. Think before you buy and pay off your credit card balance as quickly as possible. You should try to never carry a balance on your credit card for more than 30 days. Credit cards can be a wonderful thing, but they have to be used responsibly.
Are these retailer's credit cards the great deals that they appear to be? Let's have a closer look at exactly how these credit cards work.
First of all, yes, it's really true that a retailer's credit card will usually give you 0% interest, no payments for two years as an example, usually for a specific type of purchase. For example, let's say you sign on for a retailer's credit card at a furniture store. Now, because you signed on for this card, you might get 10% off your purchase price, plus you get 0% down and 0% interest with no payments for the next two years.
This is a great deal, with one caveat. If you don't completely pay off this retailer's credit card within those two years, you'll be charged interest on the purchase ? not just from the day that this no payments period runs out, but retroactively. The interest will probably also be compounded every thirty days over that two years; this can really add up.
So, you have to be careful here. If you want to use one of these retailers' credit cards, you have to be willing to be very, very conscientious and pay off the balance on that credit card before your introductory "special" period ends. If you don't, you're going to be paying a lot more for that purchase than you intended to -- and here's the thing; a lot of times, retailers' credit card interest rates are HIGHER than those of your traditional Visa or MasterCard. Therefore, you're also going to be hit with a higher interest rate for those purchases.
If you're not at all sure you're going to be able to pay for the purchase in full before the introductory period ends, don't do it. Now, of course, the best scenario is not to get into debt with these types of purchases at all and instead pay cash for things you really want or need. However, if you must use credit to make this type of purchase, a better bet may be to use a lower interest rate but "generic" credit card such as Visa or MasterCard, and pay down your purchases as soon as possible. Even though you won't save a percentage of the sale price as the retailer might promise you to get you to sign up for the card (such as 10% off if you purchase with the retailer's card), you'll save money in the long run because you'll be paying lower interest rates.
If the retailer's credit card in question is from a shop where you are a regular and you know that you can afford to pay the entire balance before the end of the introductory period, then these cards can be a good deal for you. If not, then you would be well advised to avoid these retailer's credit cards. Those retroactive interest charges can really hurt you otherwise. Make sure you can afford to quickly repay the balance before you sign up for anything.
Last of all; remember that no matter what kind of credit card you use, you'll pay a lot of money in interest if you aren't careful with your purchases. Think before you buy and pay off your credit card balance as quickly as possible. You should try to never carry a balance on your credit card for more than 30 days. Credit cards can be a wonderful thing, but they have to be used responsibly.
About the Author:
Steven J. Talrechi is a veteran on credit for over 10 years. He authors various topics on said field, including application for a credit card, and different credit card offers.
posted by Credit Counseling at
7:49 AM
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