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Store credit cards and the reality

Wednesday, January 05, 2011

If you have done shopping in recently, you would have heard about the store credit cards. Many signs seem to suggest that you will save more with these store cards. There are additional promises of rebates if you apply the same day. All these factors could tempt you into opening a new store credit card account. However, if you look at the interest rates and the likely effect on your credit score you may be able to get the bigger picture.

If you are a young customer, or if you had financial problems in the past, you could have a low credit score, and you need to figure out a way of establishing a good credit history. Without proof of your creditworthiness, you cannot get a good credit card from the larger card issuers. Therefore, store credit cards come to your rescue, when it comes to establishing your credit history.

The departmental stores that issue store cards use the services of finance companies rather than major banks for handling their transactions. Although they are easier to get, they might not contribute to your credit score to the same extent as your bank cards. However, you need to show that you are a responsible customer with the store card before going for a more reputable card.

A common folly that consumers make is to close the store card after availing the discount. 15% of your credit rating is based on the length of your credit history, and if you have few credit accounts, closing one of them would actually affect your score.