Retail credit cards are often very easy to get, and that tempts a lot of people into stashing one or two for their favorite stores in their purses and wallets. However, this is usually an unwise idea; retail credit cards are often traps that are exceedingly difficult to get find a way out of. They often come with a onetime reward that may be worth the single purchase you made with it when you opened it, but having the temptation of a credit card on hand all of the time isn’t worth the hassle.
The rules that apply to other credit card companies don’t always apply to retail cards. Often, retail credit cards can start you off at any interest and jump to any interest as well; they usually start out in the 20% range, which is almost double the average credit card rate. Often, you also do not have the same dispute rights – that is, if someone uses your card, most of the time you can’t call the company to get the charges reimbursed – as a regular Visa card or card with a credit card logo that’s usually issued for your bank account as a debit card.
Oftentimes, there is also an attractive minimum payment – that is to say it’s usually incredibly low. However, if you carry a large balance, the card’s payment doesn’t always go up, and you’re stuck making payments towards a card that has more interest applied every month than your minimum payment, thus sticking you in an incredibly costly circle without any obvious way out.
Another secretive feature of a store card that is not often known is they do not have to follow the grace period laws, either – which means they can give you 10 days to pay your bill and charge you a penalty when you don’t have it in that time without breaking any laws whatsoever.
Even if it’s just a store card, it still affects your credit the same way. Even though a store card gets to abide by different rules and charge you an arm and a leg for interest right off the bat, that doesn’t mean that if you shirk payments, you won’t see a blemish on your credit report. In fact, many retail credit card providers actually will report a delinquent account a bit faster than a regular credit card, which means even if you’re only a few days late, it may pop up on your credit report the next month.
Closing one of these cards also doesn’t remove it from your credit report, and it’ll be there just as long as any other card (seven or so years). Retail cards function just like limited credit cards in many ways, so if you think you can just walk into a store and get a card to close it out later, unfortunately, you’re mistaken – every single card will pop up on your credit score.
And even after all of that, you can’t even combine discounts with these cards. Sometimes, especially at specialty clothing stores, you can gain an extra 10% or 20% off your purchase when you present your card; however, these stores are under no obligation to let you combine in-store discounts. So if something is on sale, they don’t even have to give you the sale price if you swipe the card, and can take the discount the card provides off of the original price, which usually doesn’t save you much money at all.
Overall, retail credit cards are a poor choice for a credit card in general, and you can usually get much better deals, rewards, and interest rates if you search for the right credit card for use instead.