Guide to Credit Cards: Store Credit Cards - And A Great Example Deal
Retail stores entered the credit card business for two reasons. First, they realized that the credit card business was highly lucrative. (All those fees and interest payments, which this Guide has shown you how to avoid.) Second, retailers realized that because credit cards encouraged people to spend more than they otherwise would, issuing credit cards to their customers would boost their own sales.
Does that mean you shouldn't sign up for credit cards issued by stores? Not at all. Some store-specific credit cards can be a great deal. You just have to be careful not to allow a store card to lull you into overspending, and, as with other credit cards, you must never borrow money on the card or make late payments.
In fact, if you use store-issued credit cards well, you can earn higher rewards than with other types of credit cards. Credit cards issued by department stores often give you a heafty discount on the day you sign up for the card. As with other types of reward credit cards, you can maximize your rewards with a little thought and planning:
• If you plan to make a large purchase from a store, make sure you can sign up for the store's credit card the day of the purchase if it offers you a special one-off discount.
• Try to delay other purchases from that store until you can make multiple purchases on the new card on the day of the offer.
• Don't make unplanned or impulse purchases that day. Remember, the goal is to save money, not to spend more than you planned.
• Ensure that you have enough money in your bank account to pay for all the purchases, and pay off the store credit card bill in full and on time.
• If the card doesn't give you further discounts in the store, consider cancelling the card after you have paid the intial bill.
Some retail store issued credit cards are a terrific deal. Here's a great example. Amazon.com offers an Amazon-branded credit card issued by BankOne. The card has no annual fee, and gives you a $20 or $30 voucher to use instantly upon approval, with no minimum to the order. That means you could order books worth $25, get free shipping, and pay only $5. And the credit card then gives you a $25 Amazon reward certificate on every $833 you spend at Amazon.com. That's a 3% reward rate.
The Amazon card's $20 sign up bonus makes it a no-brainer. Why wouldn't you apply for that card? If you're not a regular Amazon customer, you could consider signing up for the card and cancelling it after your first order. You'll have saved yourself $20 off an Amazon order for two minutes work. If you are a regular Amazon.com customer, the ongoing 3% reward rate on Amazon purchases is higher than you'll get from most other cards. Consider using the card for your Amazon.com purchases, and setting up a direct debit to your bank account for your full monthly balance. You can apply for the card here:
We've linked to the The Amazon.com credit card as an affiliate, so we get paid if you sign up. It's the only case in this Guide where a link involves a direct commercial relationship with a vendor, but we hope it hasn't affected our objectivity. For example, we're not sure that BankOne would appreciate our recommendation that you sign up for the card and then cancel it after the first order if you aren't a regular Amazon customer.
The Amazon credit card is just one example of a great store credit card deal. There are many others around if you keep your eyes open for them. Costco, for example, at one time offered a $25 voucher for signing up for a Costco-branded American Express card.
In the next section we'll look at low interest rate credit cards.
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