How to Use a Store Credit Card the Right Way

Much of the advice you read about store credit cards is that you should avoid them at all costs. The high interest rates and low credit limits aren’t the most attractive features for a credit card. Plus, if you’re not disciplined, you could be tempted to rack up more debt than you can afford to.

Store credit cards aren’t all bad. The savings and rewards can be lucrative, especially for stores you already shop frequently. If you want to take advantage of the perks of a store credit card, avoid the traps here are some tips for using a store credit card the right way.

Plan how much you’re going to spend.

Never let your spending be dictated by your credit limit, even if it’s high. Before you shop, use your budget to figure out what you can afford to spend in the store and stick to that amount. It takes discipline to hold yourself to an amount that’s lower than you credit limit, but this rule is key to staying out of debt. If you spend more than you can afford, you can run into payment and credit issues down the road.

Pay your balance in full each month.

APRs on store credit cards tend to be higher than any other type of credit card, often ranging between 24.99% to 29.99% - much higher than the national average credit card rate. Since one of the biggest drawbacks of a store credit card is the interest rate, you can avoid paying expensive finance charges by paying your balance in full each month. Most store credit cards have a grace period for avoiding finance charges and you have to pay in full each month to take advantage of it. No exceptions. Any month you pay less than the full balance, you’ll be hit with a finance charge for that balance.

Choose a co-branded credit card.

A co-branded credit card is partnered with Visa, MasterCard, or American Express so you can use your card any place that accepts that network’s credit cards. You’ll need better credit to qualify for a co-branded credit card, but it allows you to consolidate your spending. Using just one credit card leaves you with one balance to keep up with and one bill to pay. Plus, you can earn rewards on all your purchases, not just the ones you make in a single store.

Pay on time each month.

You can eliminate the cost of carrying a store credit card by eliminating all interest and fees - that includes late fees. Late fees can range from $28 to $38 depending on the number of late payments you’ve made in a six months period. If the late fee isn’t bad enough, in some cases, paying late will cause you to forfeit your rewards for good. Losing your rewards negates the point of having the store credit card in the first place.

Only open a store credit card if you were planning to open one anyway.

Don’t let a store clerk talk you into opening a store credit card just to save money on that day’s purchase. You should limit the number of credit cards you have, especially store credit cards, which means you should be intentional about the which store you open a credit card with. 

Research the store credit card before you open it. Store clerks typically don’t have rate and pricing information about their credit cards, which leaves you without the details you need to make an informed decision.

Look beyond the first-time rewards.

Saving 20% one-time isn’t enough to open a new credit card. If it’s a store you shop frequently enough to consider their credit card, make sure the ongoing rewards are are lucrative enough to accept an additional credit responsibility. A 5% discount on each purchase or double points for every dollar you spend in-store are good rewards to consider.

Make sure there aren’t better non-store credit card options.

There are dozens of great rewards credit cards on the market, some that pay up to 5% cash back on certain categories of spending. When you’re considering a store credit card, include a few other credit cards in your comparison, to be sure you’re making the best choice.