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How Store Credit Cards Differ From Regular Credit Cards

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Before you consider a store credit card, it’s a good idea to note the various differences between a traditional credit card and a store credit card. While the premise is pretty much the same, the details including benefits, APR, and late fees can be drastically different. Here are some ways that store credit cards are different.

Store Cards Can Only Be Used In One Place

While many stores do offer variations to their credit cards that can be used anywhere, the general concept of a store card is that it can only be used in that particular store. The store basically gives you a line of credit to use specifically on their products.

If you want to centralize your spending in one place, a store card is a good option for you. Choosing a department store like Target to open a card at can have the added benefit of 5% discounts on everything from clothing to groceries.

This can help you close or pay down other lines of credit, and instead focus on a single credit line. You’ll be able to get all of your household items in one place, and only have to pay one monthly bill.

Store Cards Usually Have Low Limits

Credit cards offer a line of credit in varying amounts; from $100 cards to even some with $10,000 limits. Store cards, however, usually keep their limits relatively low; in the few thousand dollars range to keep risk down.

Low limits make it easier to max out the card, so you’ll want to make sure you’re tracking your spending accordingly. Keep an eye on your limits, because cards will often have fees associated with breaching them.

The more you spend, the more interest you pay as well. Keep your spending within your means. If you couldn’t afford an extra $1,000 each month, you might want to consider a card with a lower limit.

That’s where store cards excel. If you can make your payments on time and keep from maxing out your card, you’ll find a good equilibrium from which you can build up your credit score.

Higher Interest Rates

Often store cards with have higher APR than regular everyday use cards. This means you’ll carry a higher interest on your balance, thus making it harder to pay off your principal balance.

Higher interest rates are easily managed with good spending habits, however. Just make sure you’re paying on time and not spending close to your card’s max limit.

Different Rewards Systems

Store cards usually have store-specific rewards and discounts associated with them. Many cards offer member-specific discounts and access to sales. Cards like the Nordstrom credit card also offer invites to brand exclusive events and shows, which you wouldn’t be able to get with a regular credit card.

In addition, many credit cards offer rewards such as a certain percentage cash back reward. Store cards seldom offer cash back rewards, but will often offer a points system where, when you acquire a certain number of points, you’ll receive a store voucher or other promotion.

The reward system you choose will depend on what you’re looking for. If you want more generalized rewards like cash back or even airline miles, you’ll want a traditional credit card. If you want special sales promotions and in-store points, a stored card is right for you.

Store Cards Are Easier To Qualify For

Store cards are great options for first-time card users. They can help initially when you start to build a credit portfolio since they’re a little easier to qualify for than traditional credit cards. Their low limits can make payments and due dates more manageable as well.

Being easier to qualify for also has its drawbacks. Creditors will usually want to see something more substantial on a credit report that just store cards, so while they can be good for initial credit building, a traditional credit card may be a better option to consider for your future.

Store cards are still reported to credit bureaus like traditional cards, so they will affect your credit score either positively or negatively, depending on your payment history and punctuality. Don’t take store cards lightly because they have lower limits.

Traditional Cards Are Usually More Flexible

Along with traditionally higher interest rates, store cards can have greater penalties for missed and/or late payments. Some late fees can climb as high as $40, making one late payment detrimental to your entire budget.

Traditional credit cards usually have less expensive late fees and offer a little more flexibility with penalties. A store takes on a bit more of a risk by offering their own cards since their primary function is not to loan money.

Which Should I Use?

Which card you use will be based solely on your spending habits and preferences, as well as your loyalty to specific brands. Store cards are generally used to promote brand loyalty, so if you’d like a card to use anywhere, you’ll want a traditional card.

A store card can be a good option for department stores, since they’ll have a variety of products for you to purchase, instead of only clothing or electronics.

Always research your options, read the fine print, and consider your APR and late fees. These are important factors in choosing any line of credit, and should not be taken lightly. The right APR can make a big difference in what you purchase.

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