Nearly every major retailer offers a co-branded credit card. We know that because it is nearly impossible to make a purchase without being offered an application for one of these store’s cards. Typically, these offers are combined with discounts on that day’s purchases. It is hard to turn down a chance to save money on a purchase that is just about to be made, but do these offers make sense?
Consider the following questions:
How Much Money Will Be Saved?
Imagine saving 10% on a department store purchase when the customer applies for their store credit card. Even if the bill is $300, the customer will only save $30, which is a paltry return at a time when many cash back cards offer $100. On the other hand, if a customer is about to purchase $3,000 in appliances from a home improvement store, he or she stands to save $300, a respectable amount.
How Good Is The Card?
Many cards offered by stores are not affiliated with larger payment networks such as Visa and MasterCard. Therefore, these products are essentially store charge cards, and not credit cards in the traditional sense. In other cases, cards co-branded with stores offer inferior interest rates, high fees, and punitive terms. Finally, most store credit cards lack 0% APR promotional financing offers on balance transfers, although many do feature “same as cash” financing on store purchases that day.
Decide Before Shopping
While it is difficult to set a general rule that applies to all store-branded cards, and impossible to review them all, consumers can take some smart steps before they shop. First, if shoppers are likely to use a new credit card to incur debt, they should inoculate themselves against store-branded cards before they leave the house. For these consumers, paying off existing debts should be their highest priority, not incurring new balances. Those who have their spending under control and enjoy a high credit score should look at each application as a potentially valuable, but finite activity. Determine in advance how much that activity is worth, and do not complete a new application unless the bonus offer exceeds that threshold. For example, several cards such as the Chase Freedom and Citi Dividend cards offer $100 cash back as a sign up bonus. On the other hand, some travel reward cards can feature sign up bonuses worth much more. Therefore, cardholders should decide ahead of time that any savings below that amount is not worth considering.
By examining the terms of in-store credit card offers, and properly valuing their hard-earned credit, shoppers can make the best decision when a retailer offers them a new account application.