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2008-12-29 02:13:11

Pros and Cons of Store Credit Card Deals

It's hard to imagine winter holiday season without big shopping sprees, great promotions and Christmas sales. Retailers do their best to attract more customers to the shops and offer really tempting discounts that boost sales. So, when you head to the register with an armful of purchases, you can be told that you can get a 10 or 20 percent discount by simply applying for the store's credit card. The following scenario is very common during Christmas holidays and most probably every shopper who has ever gone to retail stores knows this by their own experience. The offer sounds really great. But before submitting your application, take your time to read more about department store deals and their pros and cons.

The real gem of department store plastics is discounts and perks they offer. They give not only initial but continuing discounts, plus exclusive shopping sales and perks that benefit shoppers. If you are a frequent shopper at some particular retailer, it may be a good choice.

Another benefit of department store plastics is that they are traditionally known as being more tolerant when it comes to approval. However this benefit is arguable this holiday season. Retailers still offer their credit deals, but the standards have become stricter. The thing is, those plastics owned and operated by the retailer has become rare. Most retailers have sold their card operations to lenders. And the latter have hard times and take steps to minimize their risk exposure.

What does it mean for regular consumers? It means that it's getting more difficult to obtain such plastics. Good news is that interest rates on department store cards will be lowered, but there are no immediate plans about this change yet.

Now let's review the cons of department store plastics. The most significant one is high interest rates. No matter how fabulous those discounts and promotions are, they will be soon eaten up by whooping interest rates.

Department store plastic fans have their arguments - store plastics have higher minimum payments compared with regular plastics. That allows holders to pay off their balances faster without accumulating massive balances. But is it really worth it to pay such a high interest rate for a 10 percent discount?

Most department store applications provide quite low spending limits. It's not the best feature, especially for those shoppers who tend to buy a lot. All the more so, this could affect your credit score. With a low lending limit, it's easy to run up your debt ratio. A high debt ratio indicates that you have too much debt in contrast with available credit. It's recommended to keep your debt ratio as low as 30%. When you exceed this level, this can hurt your score rating and even trigger other lenders to hike your interest rates or cut credit limits.

Department store plastics is not the right fit for impulsive shoppers and those holders who can run into debts under the influence of shopping ads and promotions. That's why they better avoid such applications. But if you're sure to save a lot on with the discounts and promotions offered, applying for one of department store cards is worth it. Before your application, read the terms and conditions carefully to make sure you'll benefit from this deal.

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Disclosure: Not an access card.