Department store credit cards: great way to establish credit

Any of the department store credit cards available from your favorite store are a great way for a new consumer to establish a credit history. But like all things there are terms, limits and conditions associated with this type of credit card.

The most obvious limitation to department store credit cards is that they can only be used at that specific department store that has issued you a line of credit. Another unfavorable term is the interest rates. This is usually set at a higher rate than most Visa and MasterCard credit cards. Most also have an annual fee associated with them.

There are also advantages to the department store credit cards. The leading one is that most will give their credit card holders a discount on each and every item for which they use their cards. Unlike a Visa or MasterCard credit cards that have a rewards package of cash back, airline miles or gifts, the department store credit cards can give an instant savings on purchases made. This discount is added to the discounts that are offered to every customer during a sale. A good example is a Labor Day sale with 20% off all items. Most department stores that have a 10% off all items for using their credit card will add this discount to the sale price so the actual price would be 30% off. This is when it is advantageous to have a department store credit card at your favorite merchant.

The draw back with this type of credit card is if there is a revolving balance. Because the interest rates are higher than other credit cards, a revolving balance would be hard to pay off. The balance of the department store credit cards should be paid in full as soon as possible if not every month.

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