Everything You Want to Know About Store Credit Cards

GECU Voices brings you guidance and insight from experts within the Credit Union. Today’s video stars Neil Peterson, our Chief Credit Officer. 

62% of consumers have applied for a store credit card in the checkout line.¹ You’ve likely faced the temptation to do so yourself or may already have several store cards in your wallet. Whether or not one of these products will benefit you depends largely on their terms and your individual credit habits. General Electric Credit Union’s (GECU) credit experts dive into some of the top considerations as you navigate applying for or managing a store card. 

The good and the bad

Are store credit cards the big bad wolf? Nope! It’s not that black and white. Some retailers offer discounts available only to customers using their house card. Having that option can save you money on major purchases. Just be vigilant in paying off those high-interest rate cards as quickly as possible or transferring the balance to your everyday credit card.

That’s not to say you should solely focus on the benefits of a store credit card, as there are stark red flags to consider before opening one. In the terms, the number you should focus on is the standard interest rate you’ll pay after any introductory period ends. Even cards offering application discounts and low introductory rates can have standard interest rates much higher than the national average, meaning bigger payments if you carry over a balance. 

Your next move 

Applying 

If you’re thinking about applying for a store credit card after vetting the ways in which it may benefit you, it’s important to consider how doing so may affect your credit score. Any new line of credit can temporarily lower your credit score. 

The biggest mistake to avoid is applying for too many cards in a short period, as having a lot of new available credit gives the impression you are less able to pay off your debt. Plus, it shortens the average length of your credit relationships. Both are key metrics in determining your credit score.

Canceling

What if you already have a store credit card open and you’ve decided using it isn’t beneficial to you or your budget? Should you just cancel it? Hold your horses! Significantly reducing the credit available to you in a short period can temporarily lower your credit score. 

That’s because of something called credit utilization rate, which is a percentage calculated by comparing the total credit available to you and how much you’re actually using. Closing some accounts while you still have outstanding balances on others creates a sudden increase in the amount of available credit you’re using, and that can be a warning sign to lenders. Even if you don’t plan to use a store credit card, consider keeping it open to avoid altering your credit utilization rate. You can stow it somewhere safe at home to free up space in your wallet for the best credit cards.  

Transferring your balance 

By transferring your balances from multiple cards to a single, lower-interest option, you can pay your bills not only faster, but for considerably less money. Plus, it’s much easier to keep track of one account balance versus several, giving you a better chance of responsibly managing your finances. 

GECU has several low-rate credit cards perfect for balance transfers. Enjoy a lower rate in addition to cash back, points, and other perks! Apply online in minutes and see for yourself why we were voted Cincinnati’s best Credit Union.