Department store credit cards can be great for young consumers establishing their credit as well as older shoppers who want to get discounts at their favorite retailers. However, department credit card interest rates tend to hover around 20% APR or more. Personal finance adviser Suze Orman reminds consumers that high interest rates can quickly lead to high credit card debt. A few credit card issuers service the retail industry, and almost all charge higher interest rates.
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Interest rates for department stores are usually fixed, meaning that you will pay the same rates as other consumers, regardless of their credit scores. This can be an advantage for consumers with marginally reasonable credit ratings. If you cannot be approved for personal credit cards or lines of credit with a lower rate, department store credit cards might be the way to go.
How Credit Limits for Department Store Credit Cards are Determined
Typically, retail credit cards come with a minimum credit line limit of around $250 to start. Well-qualified applicants can receive a department store credit card with a much higher limit, but these consumers also have several aged accounts.
Department store credit card issuers consider raw FICO scores as well as income and debt amounts. If you are applying for an in-store credit card, your shopping patterns may also be taken into consideration.
As long as you met the minimum score criteria, have no current major delinquencies and a source of income, you should be able to be approved.
Consumers can also ask to have their department store credit card limits raised on occasion. A good time to do this is directly after paying down other credit card debts and prior to applying for new lines of credit. Even if your department store credit card spending limit isn’t increased immediately, you may be pleased when you are offered a larger credit limit in the future.
Carrying a Balance on Department Store Credit Cards
Despite the fact that consumers are permitted to make minimum monthly payments on their department store credit cards, you should avoid carrying a balance at anytime. Because these credit cards can have interest rates of 20% to 30%, even small purchases add up fast. Unless you have just been approved for a department store credit card with a low introductory offer, pay your balance off in full each month.
Some consumers use their department store credit card to purchase furniture or finance home improvements, but they usually try to pay off their credit card debts as quickly as possible. If you do decide to carry a balance, make sure that you have a plan to get out of debt.
Remember that credit card balances can grow much higher than the credit line limit. This means that you could end up being several thousand dollars in credit card debt simply because of fees, penalties and compounded interest. To avoid this, don’t carry a balance and never spend more on your department store credit card than you can pay off in a single billing cycle.
Negotiating for Lower Rates on Department Store Cards
It is well known that credit cardholders with good credit and consistent repayment histories can sometimes negotiate for a lower rate. The Federal Trade Commission explains how credit is built and the ways in which consumers can save on their credit card bills. However, department store credit cards work a little differently. They usually have default interest rates to discourage you from spending too much, but there are few additional rewards for responsible cardholders.
You can always try asking for a lower department store credit card interest rate, but there may be policies that prevent customer service representatives from honoring your request. You will need to get in contact with your department store credit card’s issuer and ask a party that can give you an honest answer.
Having a lower interest rate on your retail credit card can be helpful, but the standard rate doesn’t have to be unreasonable.
If you can’t get a lower rate and you are unhappy with the amount of money you are paying on your department store credit card, stop using it. Continue to pay the bill until you have satisfied your debt, but move on to another credit card that has better terms.
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