The Pros and Cons of Department Store Credit Cards

We've all been taunted at the cash register after racking up an unexpectedly large bill, and then a cheery store clerk chirps, "If you apply for a (store XX) credit card, you'll receive a 15% discount on all your purchases today!". The temptation to lessen the blow of the spending spree is extremely tantalizing - should you succumb?
The answer is (drum-roll please) maybe yes, maybe no? There are pros and cons, and if you are the type of person that will be subject to temptation to "shop till you drop" simply because you now proudly hold a Macy's card, it's probably not a wise move. On the other hand, if you have the cash to pay off the charge in full and have not overextended yourself with numerous card applications already this year, a one-time savings of 15% on a planned and necessary purchase can be dollars in your pocket.
Some additional potential pros associated with retail store cards are:

• Easier qualification for individuals with poor or minimal credit. This is beneficial for consumers who need to establish or improve their credit history.
• Special store perks may be included such as free shipping, delivery, layaway, etc.
• Store-specific rewards programs which may be exchanged for gift cards or direct store credit.
• "Members only" specials or promotions or additional discounts on particular items.
  
  Sounds good so far, but naturally there has to be at least one "con", right? There's actually more than one. Here they are:
  
• Spending Too Much. We already mentioned the psychological issue that a department store card such as Macy's might tempt you to make unnecessary (or unaffordable) impulse buys.
• High Interest Rates. These cards rarely have reasonable interest rates (they are frequently over 20%). All your "perks" will dissolve quickly if you aren't planning to pay them off in full each month.
• Could Hurt Your Credit Score. Another con is that the FICO scoring model can actually ding you for having these cards. If you are just starting out trying to build your credit though, I still recommend these cards. Some credit lines on your report are better than none.

So the next time a store clerk hurls the temptation of instant savings gratification via a department store credit card, take a timeout and think through the pros and cons before making your decision. Or better yet, ask for the application and read it through before signing on; you'll be glad you did.
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