- The Washington Times - Tuesday, July 4, 2006

Q: Are store credit cards worth signing up for, and how do I keep from getting so overwhelmed by it all?

A: It seems that every time shoppers go to a store, they get bombarded by offers to sign up for a store credit card, and it can be so confusing.

Stores are gung-ho about their cards because they help create customer loyalty and can help track customer buying habits. They’re also a profitable business.

For customers, store credit cards offer extra savings and provide a heads-up on special sales in the future. They also can be an easy way for shoppers to establish credit history. But they need to be used wisely, specialists say.

Above all, if consumers can’t pay off their balances in full, it’s best to avoid store cards because interest charges for those cards are higher than those for bank cards. Greg McBride, senior financial analyst at Bankrate.com, said a typical store card now charges interest of 19.8 percent, compared with a bank card, which currently charges about 13.5 percent.

Another issue to keep in mind is that taking out too many cards at once actually can hurt one’s credit score.

“They can definitely be a good deal, but they have to be used wisely,” said Andrea Rock, senior editor at Consumer Reports.

Here are some tips on how to manage the store credit-card issue:

• Sign up only for store cards that give the best deals or immediate savings. For example, if a customer is buying a $2,000 couch and can get 10 percent off upon signing up for a card, then he should consider the offer, said Mallory Duncan, senior vice president and general counsel at the National Retail Federation, the retail-industry trade group.

Ms. Duncan also said shoppers should focus on stores that they like and to which they are most loyal.

• Don’t sign up for a slew of store credit cards, because such an increased line of credit will hurt your credit rating. Ms. Rock said one should limit the number of store credit cards to one or two during a six- to 12-month period.

“What you don’t want is to open up a credit card in every store in the mall and leave a trail of credit inquiries in your wake,” Mr. McBride said.

That’s a sign of an active customer, and credit bureaus are going to look at that with reservations, he said.

At the same time, consumers shouldn’t close their lines of credit from store cards either, particularly right before applying for a mortgage or a car loan. Credit scores are based in part on your debt-to-credit ratio.

• Examine the policies of the card. That means looking at the grace period — from the end of the billing cycle to when the payment is due. Mr. McBride said you also should look at the default policy and make sure that the interest rate isn’t going to climb up to 20 percent if you miss one payment.


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