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The pros and cons of an in-store credit card

Many shoppers in Bradley County have been offered a credit card at the check-out counter of a discount store, super market or other retailer. The offer seems almost too good to be true - no credit check, instant credit of $500 or more, and low interest rates. Like most things that appear to be too good to be true, an in-store credit card may also be too good to be true. Before accepting another dollop of credit card debt, a person should carefully consider both the advantages and disadvantages of an in-store credit card.

The first point to consider is the fact that the merchant or professional is not issuing the credit. The credit most likely comes from a third-party bank or finance company. If problems arise in using the card, a person might wind up dealing with a stranger hundreds or thousands of miles away. If the offered card has a low limit, the user could exhaust the credit limit and thereby raise the utilization rate, which translates into a lower credit rating. Interest rates on in-store credit cards can be significantly higher than bank-issued credit cards, almost 2.5 percent higher than the national average.

Issuers of in-store credit cards know that the shopper is feeling stressed and may not take time to examine the terms of the new card, and they insert a number of oppressive terms. One of the worst is deferred interest: if the card holder does not pay the entire balance during the zero interest period, the card company will charge the holder for retroactive interest on the entire balance, including on purchases made during the introductory period.

A number of remedies for these ills are available. The most obvious is to refuse the offer and take a few days to review the terms carefully. Another is to use a payment plan offered by the provider of the goods or services that are being considered. Many other forms of credit, such as home equity loans and bank lines of credit, are available that do not entail the risk of an in-store credit card.

Post Type: Topical

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