There are many shops that have a store card available for customers to apply for. This is not the same as a loyalty card but similar to a credit card in that you can use it to buy goods and then pay for them later. There are advantages and disadvantages of these cards and it is a good idea to understand what some of these are before you decide whether this card is the right choice for you.
Interest Free Credit
When you take out a store card or credit card you will be able to use it to buy items and delay paying for them. When you get your monthly bill, you will then have the option or paying for the items or paying interest and delaying the repayment. You will get interest free credit up until the repayment is due. However, you need to be aware that if you do not repay the card in full, you will start to pay interest on what you owe. You can set up a direct debit to repay the card in full every month and this will allow you to buy things all month in the shop and then get interest free credit until they are paid for. If you put the money, you would otherwise have used to pay for them in a savings account you will be able to get some interest on it and gain even more.
In Store Offers and Discounts
Some stores will have certain offers available to their card holders, it could be that you will get some special discounts or that you will be able to attend early sale events and things like this. Different stores will have different offers for their card holders. If you shop in that store a lot, then getting discounts and other advantages could help you to save money so it could be good. However, if you do not pay the card in full each month, you will pay interest and this could be more than the money you are saving due to the discount, so make sure that you calculate it carefully. If you intend to repay the card in full, then the discount will save you money, but if not, then calculate the value of the discount and work out how many months you will have to have it unpaid until you end up paying more in interest than you have saved from the discount. It will probably not be very long.
High Interest Rate
You will find that store cards will tend to have pretty high interest rates. They will often be higher than a credit card, which is high anyway compared to some other types of borrowing. Even if you plan on paying the card off in full each month and have a direct debit set up to do so, it is always worth checking this interest rate and being aware of it. There might just be an occasion when you cannot afford that payment and you need to ensure that you are aware of how much that might cost you. If you do not intend to repay in full each month, then you need to be even more aware of the interest rate. Think about how much you will be paying each month for that item until it is paid off. It could be a lot of extra money.
Get into Debt
It could be easy to get into debt if you have a store card. If the card is for your favourite shop then you might see it as a way to buy lots of items that you want and then find that you spend so much that you cannot afford to repay it all. It is important to make sure that you are really sensible when you take out the card and make sure that you are just as careful with your spending or perhaps even more careful than you were before. It might feel like, when you get the card, you have a way to buy everything that you want, almost as if you have free money. But it is not your money, you are borrowing it and you will need to repay it. The debt will also show up on your credit report and that could make it difficult for you if you want to rent a property or get a different type of loan or mortgage as it will be seen as you not having good control of your money.
Discouraged from Shopping Around
If you have a card for a certain store it may mean that you will be more inclined to spend money there than anywhere else. If it is one of your favourites, then this is not surprising. However, you will need to make sure that you are not paying more than you need to. It could be that you will be able to get the items that you are buying for a lower price elsewhere. However, you may not bother to look anywhere else because you have a card to use at that particular store. So do make sure that you are still comparing prices. You may even find that other places have items that are better value for money, even if they are not cheaper and you might want to consider those as well.
