Money When You Need It: The Pros and Cons of Retail Credit Cards

75% of people living in the U.S. have purchased a retail credit card. They have become commonplace for most people. Retail cards allow you to borrow money so you have an easier time purchasing products.

Retail cards may not be right for everyone. It is important to look at the pros and cons that they offer. By arming yourself with this knowledge, you will be able to make the best choices based on your needs.

Advantages of Having Retail Credit Cards

First, we are going to look at some of the benefits of using retail credit cards.

Store Discounts and Coupons

Retail cards have great appeal because of the perks they offer you over the course of having the card. One incentive you may come across are retail cards offering up to a 5% cash back option for any purchases you make.

If they don’t offer cash back, you will get a regular discount that you can use in the retail store. This percentage off will be small compared to your sign-up bonus.

You may be offered coupons during specific times of the year that you can use on your purchases as well. During holidays and events, you may be given a special coupon only available to those who have a retail card.

Check with your retailer to find out how much you would be saving using their cash back or discount perks. Don’t sign up for their card before you do so. If you are only getting a small amount, it may not be worth the trouble.

Sign-Up Bonus

Many retailers offer a sign-up bonus. This is the perk they are going to use to draw you in. They can offer discounts as high as 30% off your purchase. Others may offer gift cards as a first-time incentive.

Beneficial If You Have Bad Credit

If you have a lower credit score rating or are new to the credit game, a retail card may be right for you. They are easy to get and can help restore/build your credit.

Disadvantages of Having Retail Credit Cards

Now that we have gone through the advantages we need to look at the disadvantages of using retail cards.

Higher Interest Rates

Regular credit cards have a 12-14% interest rate. Retail cards can be double those numbers. You may want to look at other options if the retail card you want has a really high interest rate.

If you can manage your money well and pay off the card quickly, retail credit cards may be a good option for you. When you pay off your card fast it negates paying those higher interest rates.

Low Credit Limits

Unlike regular credit cards, retail cards tend to have lower credit limits. When you first get the card you will have around $100-$500 available to you. Your card may be maxed out before you get any real use out of it.

Limited Usability

If you choose to get a retail card you won’t have as much freedom with it as you would a regular credit card. You will only be allowed to use your retail credit card with specific stores and/or websites.

Annual Fees

Annual fees are a separated category for one simple reason, it is an advantage and a disadvantage. Some retail cards have no annual fees while others do.

It is great to be able to pick up a card and not be charged more just for having it. It is a bargain when you get awesome benefits from a retail card without having to pay more.

For companies that make you pay an annual fee, look at the price of their fee to see if it is worth it. If you aren’t going to use their services often, it may not be a good idea to buy their retail card. In the end, you won’t be getting as much as you are putting in.

Let’s Get Shopping

Now that we have looked at some of the benefits and drawbacks of retail cards you are ready to make a decision. Do you want them to be part of your daily life?

Start researching the companies you are interested in getting retail credit cards from. See if they are a perfect match for you.

Review our blog if you would like to learn more about credit cards and credit in general.

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