Realities of Retail Credit Cards

Retail store credit cards are becoming increasingly popular these days, as they offer bonus coupons and reward points for use. Consumers find such offers enticing, especially for stores they frequent often. But, are these reward points and bonus coupons really worth it?

Designer Debt

For the average consumer, having at least one retail credit card is a must-have. Many people feel they are being honored by the store for making frequent purchases in the form of “free money” or hefty coupons. Sadly, more often than not these “rewards” are simply a gimmick to attract more borrowers, which can be a debt disaster waiting to happen.

The problem here lies in our spending habits. Retail credit cards are often packed with extra fees and carry much higher interest rates than a traditional credit card. Although they are unsecured lines of credit, these cards can quickly become problematic when you miss a payment. The bottom line is that these types of credit cards are unnecessary and likely to cost you more in interest fees than would a traditional card.

The one exception, in which retail cards can be a better solution, is to the consumer who recently completed a bankruptcy case. The reason is that these types of credit cards are easier to obtain, and may be the best place to start rebuilding credit after a debt discharge. However, one they have served their purpose it is a good idea to leave them open with a zero balance and cut up the card. This will help continue the credit boost without the temptation of using an unnecessary card in a newly established credit future.