Most credit card users have at least one department store credit card. These are credit cards issued to be used at a particular department store only. Some are called store brand credit cards or private label credit cards. They will get customers lured into them by offering a discount when you apply or extremely low introductory rates. If you happen to love the store you are shopping at and frequent it often many customers will obtain a department store credit card. Are these cards good or bad for your credit?

Why do stores want customers to use their credit cards? The answer is always money. Stores will make a lot of money off of department store credit cards. Store cards are much easier to get than a major universal credit card. They have less strict credit requirements and do not use the same screening process as major credit card companies. A fairly quick credit score check is made and typically you are instantly approved for the credit card usually while waiting in line for check out of purchased items.

Research has shown that people tend to spend more than they need and more than they can afford with credit cards.

Department store credit cards are instantly issued and customers are tempted to purchase more than they would have normally purchased with cash. Because of their lower standards for approval they will generally have fairly high interest rates for card holders. For those customers that carry a balance and don’t pay off the balance in full each month the store is cashing in on the higher interest rates being charged. Even for cards that tempt you in with zero percent interest rates, make certain you read the fine print in the contract. Many times if the balance is not paid in full during the promotional period you are charged interest on the initial purchase, not on the remainder of the balance.

Your credit score is disturbed when you open a department store credit card. Consider this if you are going to need another type of loan or credit in the future. For instance, if you may need a car loan in the next six months and open a department store credit card it may not be wise to open a department store credit card. Even your car insurance will be affected by opening a department store credit card since the car insurance company will be reviewing your credit score when determining our rates.

Remember to read the fine prints carefully. Use a magnifying glass if needed!

There is more scrutiny today of credit scores and opening a department store credit card may not be a great idea. Nearly 30% of your credit score is based on utilization and the lower your utilization the better your score. Several department store credit cards versus one major universal credit card will make a difference in your score. Department store credit cards have lower credit limits. The more of your credit limit that is used, the lower your credit ratio will be. One universal card with a high credit limit with the same amount of charges will have a better credit ratio.

Some people will open a department store credit card simply to obtain the promotional or start up discount. For example, shopping for Christmas and purchasing a large ticket item you want the discount. You pay off the balance and close the card. Unfortunately, this will make your credit score take a negative hit. Think twice about using a department store credit card in this manner.

If you do decide to obtain a department store credit card consider several things.

• Always read the fine print in the contract so you don’t have any harmful surprises such as higher interest rates than you imagined
• Know the difference between the promotional rates and regular rates and how they affect any purchases that you make
• Use your card wisely
• Opening a department store credit card for a special purchase and then closing it will make your credit score take a negative hit
• A department store credit card has a lower limit in most case than a universal credit card and will make your debt ratio score look worse than it actually is

Department store credit cards may be great for someone that needs to get their credit score up since they have less stringent guidelines than universal credit cards. However, in the long run they may end up costing you more than what they are worth.

Credit Score underlines the creditworthiness of a person. When applying for credit facilities like mortgage, credit card, and business loans, the bank will assess your credit score to determine if you qualify for it.