Pros and cons of store credit cards

CLEVELAND - You browse, you decide, and when you’re ready to pay you’re offered a 15 percent discount, $20 back right away, or free shipping. How? By applying for a store credit card. But Consumer Reports Money Adviser says resist the urge to immediately say, “Yes.”

Some of the biggest stores, such as Bloomingdale’s, Macy’s, and Sears, charge around 25 percent interest on unpaid balances. That’s about twice the average you would pay with a traditional bank credit card.

Carefully look over cash-back and rewards offers, too. Walmart touts 1 percent cash back on all purchases. But in small type there is a big red flag. You have to spend $3,000 a year before you get the full 1 percent cash back.

But Consumer Reports did find stores whose cards offer very good cash-back terms. At L.L.Bean you can get 3 percent back. The money comes in store coupons that you have a year to use. Even better, Target’s credit card gives 5 percent back right at the checkout.

Stores such as Target and Nordstrom offer a different kind of plastic—debit cards. Those cards take money directly from your bank account. But if you overdraw you can be hit with hefty fees, so they are not for everybody.

For big purchases consider a store card from electronics and home stores such as Apple, Best Buy, Home Depot, and Lowe’s. Those cards generally offer six months to a year financing with no interest for big-ticket items. Be sure to pay the balance on time or interest will be charged retroactively. Consumer Reports Money Adviser says that store cards can have good and bad effects on your credit. They are generally easier to get than bank cards, so they can help you build a credit history. But acquiring too many at once can hurt your credit score.

Bottom line. If you choose carefully, a store credit card can be a real perk. Many stores also offer credit cards that are branded American Express, MasterCard, or Visa. Those cards allow you to get rewards for purchases at other stores, too. L.L.Bean’s Visa and Costco’s American Express have some consumer-friendly terms that are worth checking out.