Do Store Credit Cards Help You Build Your Credit?
Getting started building your credit is the hardest part. If you have no credit history, have filed for bankruptcy, or have just started earning a steady income after a period of financial hardship, you must first break out of the vicious cycle where no one approves you for loans because you have not built your credit history, and you cannot build your credit history because no one approves you for loans. You have to start small; secured credit cards and buy now pay later (BNPL) are popular ways for people with low credit scores to access credit, since both are much less risky than payday loans and online rent-a-bank loans. Store credit cards are not a new option, and after being eclipsed by financial products of more recent provenance, they are seeing a resurgence in popularity. Do the benefits of store credit cards outweigh the risks? It depends on your overall financial situation. If you are considering filing for bankruptcy and ready to strategize about how to rebuild your finances after the bankruptcy filing, contact a Philadelphia debt collection abuse lawyer.
How Do Store Credit Cards Work?
Store credit cards, also known as retail credit cards, only enable you to make purchases from the retailer that issued them. In the old days, most store credit cards were connected to department stores such as Macy’s, but today, many different retail companies, including supermarkets and online retailers, offer store credit cards. Today, some of the most popular store credit cards are Walmart, Target, Kroger, and Amazon.
Retail credit cards charge interest, and their interest rates can be much higher than those of conventional credit cards. For years, there was an unwritten rule that 30 percent was the maximum interest rate for a store credit card, but in the past few years, an increasing number of retail credit cards have charged interest rates in excess of 30 percent. Getting approved for a store credit card is easier than getting approved for a Visa or MasterCard, but you usually need a credit score of at least 640. Department stores often offer promotions where, if a customer opens an account, not only will they get a discount on that day’s purchase, but they will also get to use the credit card interest-free for six months.
Therefore, the only truly risk-free way to use a retail credit card is when you are sure you can pay off the balance before the interest-free period expires. After that, only use it to get discounts at the store. As with a secured credit card, you are using it to establish a credit history, even though you could have afforded to pay for the purchase in cash.
Contact Louis S. Schwartz About Rebuilding Your Credit After Bankruptcy
A Philadelphia consumer law attorney can help you find low-risk ways to establish your credit history after filing for bankruptcy or suffering a financial hardship. Contact Louis S. Schwartz at CONSUMERLAWPA.com to set up a free, confidential consultation.