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I've been using credit cards for a long time now, and I know that one of the main perks involved is getting cash back on the purchases you make. Some people take that cash back and use it to pad their savings. I tend to take my cash back and use it to pay for family outings or trips, since I have my savings on autopilot and am on track as far as they're concerned.
Meanwhile, although I carry my share of credit cards, I try to be judicious about applying for new ones. And to date, I've never actually had a store credit card.
A store credit card is tied to a specific merchant. These cards can be easier to qualify for than regular credit cards, but they also tend to come with higher interest rates.
Plus, with a store credit, you're limited as to where you can use it. Meanwhile, every time you apply for a new credit card, your credit score takes a minor hit. So I generally like to stick to credit cards that aren't store-specific, since they're so limiting.
But for the first time, I'm actually thinking of opening a store credit card. Here's why.
It's all about the numbers
My current go-to credit card -- the one I make most of my purchases on -- offers generous amounts of cash back for gas and other essential purchases. But when it comes to cash back on retail purchases, I only get 1%.
Meanwhile, there's a store I tend to frequent a lot because it's where I buy a lot of my kids' clothing. And I recently learned that opening a store credit card there would give me 5% cash back on my purchases in the form of an in-store credit. It would also give me discounts on store purchases during promotional periods.
Recently, I went through my credit card statements to see what I've been spending at that store on a monthly basis. Now, a disclaimer -- I recently had to restock my kids' entire summer wardrobe, because they managed to outgrow everything from last year. So my spending over the past couple of months was higher than usual. But all told, I spent about $100 a month at that store before my big shopping spree. And 5% back would mean getting $5 back a month to use at that store.
By contrast, my go-to credit card gave me just $1 back on those purchases. Granted, that's $1 I can redeem for actual cash, whereas the cash back the store card gives out can only be redeemed for store merchandise. But seeing as how frequently I shop at that store, I'm thinking that at this point, the store card just plain makes sense.
A good choice for me
I'm planning to hold off on applying for my store card until I'm ready to purchase back-to-school clothes for my kids. Sometimes, you get extra cash back on your first purchase when you open a store credit card, so I figure I might as well do so at a time when I have a lot to buy.
Generally, I still plan to stay away from store credit cards. But in this one situation, it just seems like signing up is a good idea. And while the interest rate on that store card will probably be astronomical, if I'm careful with what I spend and pay my bills in full every month, I won't accrue interest at all, so that won't have to be an issue.
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