Store cards and credit cards have their advantages and disadvantages, but which is best for you. In this article we point out some basics to help you take control of your spending.
Do you have a store card? How many do you have? Do you know how much you are spending on each?
Store cards are a great idea if you use them properly, but they can cause huge amounts of personal financial damage if you don’t take control.
When you are offered a store card here a few things to bear in mind:
- Get very clear on what the offer is exactly. Most stores will offer a card with a promotional deal – say 10% off any purchases that day and for the next week. So what exactly is the offer and how long does it last?
- Sometimes store cards are heavily pushed during a sale. Again, what’s the offer – for example, do you get 10% off sale items too?
- What are the privileges you get as a store card holder? Do you get a discount every time you shop? Do you get reward points of some kind? Do you get special preview events for new ranges? And what are the details – how many points, how many previews a year?
- How much credit are they offering you? And can you handle it – or will it make you feel like a kid in a candy store?
- What are the repayment terms exactly? What’s the minimum repayment? What’s the APR – during the offer period and after the offer period?
- Are you bothered? It’s easy to take up what seems like a great offer with no effort on your part. But remember you would probably have bought the things you are buying even if there was no store card being waved in your face. Do you really want another piece of plastic, another debt?
- Can you get the things you want cheaper elsewhere anyway? Most things you usually can do.
- Can you pay for the things you want using your credit card? Credit cards usually have a much lower APR than store cards – so unless you can afford to make repayments in full, you could well lose in interest payments what you gain in special offers.
The same kind of questions can be asked about credit cards:
How many do you have? Do you know what you’re spending? Are you in control? What are the special offers – low interest, 0% balance transfers, etc? What’s the credit limit and can you handle it? What are the repayment terms, including APR?
The major differences from a store card are that you can use a credit card almost anywhere, and that the APR is usually a lot lower. It’s also a lot easier to control your spending if it’s all on one card.
So when you’ve weighed up both kinds of card, what should you do? Here’s a couple of ideas:
- For general use, have just one credit card. Keep the credit limits low and in control.
- If you are offered a store card and there’s an unbeatable opening offer on your purchase, take it. Then, if you can’t pay off the debt in one go, use your credit card to pay it off so that you at least get lower interest charges. Next, when your shiny new plastic card arrives, cut it up! Seriously. If you don’t destroy it you (or someone in your family) will spend on it and the debt spiral will continue.