Credit Cards

When a Department Store Credit Card Might Make Sense

One of the subtle influences on your credit score is the type of credit account you have. For instance, while it doesn’t count that much, it makes a small difference whether you have a department store credit card or a major bank credit card. Normally, I fall firmly into the camp of not having a department store credit card. It seems pointless: The interest rates are often higher and there are rarely rewards programs.

But I began to change my mind as I helped my seven-year-old with back-to-school shopping this year. I realized that we buy almost all of the clothes for our family at one store. This store routinely offers anywhere between 15% and 30% off your purchase when you pay with the department store credit card. (I can get 20% off for applying!) Plus, once a certain yearly spending threshold is reached, there are different opportunities to get extra savings each year.

I began toting up how much I could save if I had this department store credit card. As long as I pay off the balance each month, it could be better than the rewards programs I have with other credit cards. After all, the card represents regular savings. With a rewards program, you have to accumulate thousands of points before you can even think of redeeming them. So you spend quite a bit of money trying to get rewards, when in some cases you could have an immediate discount that provides more value.

Of course, getting a department store credit card doesn’t always make sense. However, here are some reasons that may make it worth it to get a department store credit card:

  • You regularly shop at one store.
  • You would shop at this store even without the card or the discount.
  • There is a regular discount offered to card customers.
  • Your budget allows you to pay off the balance each month, without accruing interest.
  • Your receive special discounts and offers that you are likely to take advantage of.
  • The savings you receive outweigh the benefits you would get from a rewards program.

While you don’t want to fill your wallet with department store credit cards, it might be worth it to choose a card that provides distinct advantages to loyal customers — especially if you are already a loyal customer.

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