Four Big Drawbacks to Store Credit Cards

The other day the Honeybee applied for a clothing-store credit card to take advantage of a deal that gave her a one-time savings of 15% off her purchase. I know.

To tell you the truth, I’m not really that big of a fan of in-store credit cards, but because the Honeybee and I are extremely disciplined when it comes to our finances and paying off the household credit cards in full at the end of each month, I didn’t really mind. After all, it’s not the first time we’ve decided to take advantage of such a promotion.

Retailer credit cards typically have several potential drawbacks that you should always consider before committing to sign up for one. Here are four of the biggest:

Dubious dispute resolution service. I’ve had a couple of instances in the past where I was stuck with an unsatisfactory service or product that the vendor refused to correct. Thankfully, my general credit card company has been able to resolve the problem each time. You usually get no such benefits with store cards; if you find a problem, you’re on your own.

Increased susceptibility to mailing lists. It’s not uncommon for consumers who sign up for store credit cards to find themselves on marketing mailing lists — and you know what that means: more junk mail.

Increased risk of adversely affecting your credit score. This can happen in one of two ways: First, for those with borderline to average credit scores, keep in mind that even one rejection can affect your ability to get future credit. So, if you think you may fall into that category, be sure to request a free credit report before applying for that credit card. Your credit score can also be adversely affected by having too many credit accounts open at one time. With that in mind, if you already have lots of credit cards in your purse or wallet, you may want to think twice before applying.

Higher interest rates. On average, store credit cards tend to have higher interest rates than general purpose credit cards. The Honeybee’s new card has a minimum annual percentage rate of 22.4%. It’s not too hard to find other cards that offer regular less than that — especially if you have excellent credit.

Yes, when you’re at the checkout counter, getting a one-time discount of up to 25% may be tempting. Just make sure you consider all the risks before making the leap, especially if you’re the type who is unable or unwilling to pay off your credit card in full at the end of every month.

Photo Credit: the consumerist


  1. 1


    #2 is a big one that many people just do not realize. The good thing though is that as awareness is being brought to this issue many applications now offer an opt out from 3rd party communication – definitely a good thing.

  2. 2

    Chet says

    The very best techniques I am aware of in order to improve credit score is to:

    1) Make payments by the due date every single month — this will place you on the road to developing a strong and trustworthy credit ranking
    2) Lower your Debt – Which means that pay not only the least sum of credit card amounts
    3) Know your limits — if you think you cannot afford something, then you most probably can’t.

    Doing these factors may perhaps imply an additional job or part-time home-based business is needed for quite a while in order to generate enough cash to reduce debt.

  3. 3


    I’d add a fifth drawback, which is the temptation to spend more. A lot of stores will provide ongoing discounts for cardholders to get them to use the card more.

  4. 4

    Kyron says

    I’ll add a really good one:

    They’ll resell your info to everybody they do direct, indirect, or affiliate business with.

    I got suckered into the late Robinsons May store card for a one time 15% discount in 2002. I paid it off, never used that card again in my life and requested them to close it.

    Fast forward many years, they went bankrupt, sold all their store credit accounts to Citibank. Citibank, in a stroke of unsurpassed genius, decided to convert all store credit cards into regular credit cards and issued new cards and promptly sent them to the last address on file (where I hadn’t lived for years).

    Fast forward another year or so and I check my credit report for a live card out there in my name. Thankfully, no one activated or abused it and it was just a matter of closing this rogue account.

    How bone-headed is that? Yes, in the libertarian world, I signed a contract that allowed them to sell / share my info with all their affiliates, blah, blah, … and it is my fault. I know. But Citibank got their dues from me. I have a 23K credit line card that is running zero charges every month for the last 7 or 8 years. May be a one time purchase occassionally to tell them I am alive so they don’t close the account. They can maintain the account, send me zero bills, new card, etc, etc but they don’t get any business from me.

    So, no more store cards for me. Though I am really tempted by the Target 5% off every purchase card … resisting it so far.

  5. 5


    Great point about the resolution process. I am sure VISA or Mastercard is more favorable toward consumers than the store you are complaining too about their own products!


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