When Using a Store Credit Card is Beneficial
I have a friend who recently got married. After visiting the traditional suit rental shops in the mall, he was leaving through Macy’s. Provincially, it happened to be one of Macy’s biggest sales days of the year. After finding the perfect suits for himself and his groomsmen, he discovered that he would save an additional 15%, plus receive $40 cash back, by signing up for the Macy’s credit card.
Of course, he signed up, made the purchase, and was able to buy the entire outfit for himself and the four groomsmen at the price it would have cost him for a single suit at the other stores. He literally saved thousands of dollars by shopping at Macy’s instead of the other stores, and saved close to a thousand dollars thanks to the sales, discounts, and rewards that he received at Macy’s.
Immediately after making the purchase, my friend pulled out his checkbook and paid off the entire balance of the store credit card. Ultimately, this is what saved him the money. Had he chosen to pay the monthly minimum on the card, these suits would have cost more than those at the other stores. However, by immediately paying off the balance, this future groom found himself with extra spending money for his honeymoon.
While we have previously mentioned that it can be dangerous for someone with poor discipline to use store credit cards, for someone who knows how to manage their finances, an occasional store credit card can be of tremendous value.
Ultimately, store credit cards are beneficial in the following cases.
You Are Making a Large Purchase
Most store loyalty cards offer an initial discount of 15-20%. This means very little on a $10 purchase. However, if the bill will put you back several hundred dollars, that 15% can add up quickly. Signing up for a store credit card when you have a significant purchase to make can save you hundreds of dollars.
You Are a Regular at the Store
If you find yourself visiting the same store time and time again, then a store loyalty card may be worth acquiring. Most store cards offer cashback bonuses, special discounts, birthday coupons, and other perks. Over time, these discounts can really add up. For a store where you only spend $100 a year, the rewards program isn’t worth your time. However, if you show up at that shop every week or two, it may be worth considering.
You Can Pay Off Your Card in Full – Immediately
As we have mentioned before, the loyalty card discounts disappear the moment that you fail to pay off your debt. Therefore, don’t even think about signing up for a loyalty credit card unless you are confident that you can pay off your bill in its entirety. Furthermore, as it is not possible to enroll most store credit cards in automatic payment through your bank, pay them off the same day that you put money on them – as waiting for the bill may result in a late payment.
Having one or two store credit cards for shops that you shop at regularly can cushion your financial position – as long as you are able to make every one of your payments on time. If you have a good grasp of your financial position, and can pay off your bills regularly, than the occasional store credit card may be a valuable way to save even more.