For starters, a retail store credit card is a physical charge card that gives you credit for a specific retailer.  The amount of credit given can vary depending on your current credit score. More credit is usually given to those with higher credit scores and less credit is typically given to applicants with lower credit scores.  Not everyone is approved, but if you are, there are pros and cons to keep in mind.

Having a retail store credit card can be great financial tool.  It can help build credit if you are at least making the minimum payment on time each month.   Payment history is key in building and maintaining good credit. When you don’t have the funds available right away, using your retail card allows you to get the items you want sooner.  For example, you might find a nice sweater that’s only on sale this week, but you get paid the week after, so you use your credit card to make sure you take advantage of the sale.  It gives a sense of instant gratification. You may even earn rewards or points that could turn into discounts or coupons for future purchases.  At the same time, it is a great way to track your spending at that store.

Keep in mind if you’re not careful, pros can turn into cons.  There may be a sale on that nice sweater and you want one in every color.  Your retail credit card can help you get all those sweaters at once.  Some people reach the maximum credit allowance and bask in the instant gratification, but then the account will start to accrue interest if the balance isn’t paid in full by the due date.  It’s been found that retail store credit cards typically have higher interest rates than regular credit cards. If you’ve maxed out the card and now owe the interest, those sweaters begin to cost more than you thought.  It’s important to keep a low balance on the credit card.  It is recommended that you shouldn’t use more than 30% of your credit limit.  If you maintain a high balance and only pay the minimum amount due, your credit may not improve for a while. Be mindful that a retail credit card is supposed to be a tool to improve your score, not lower it.   


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