hi i'm john ganotis from creditcardinsider.com and today's video is: three things you should know before you apply for a store credit card. what do i mean by a store credit card? well, a credit card that you get at a retailstore, like best buy, victoria's secret, walmart, amazon, one of those. the first thing to know before you apply for a store credit card is that you may only be able to use it
Victoria Secret Credit Card Payment Online, at that store. if it doesn't say visa,mastercard, american express, or discover somewhere on the actual credit card or on the application for the credit card chances are you will only be able to useit at that one brand of store. you won't be able to just use it everywhere thatcredit cards are accepted. this is
especially problematic if it's yourfirst and only credit card and you want to be able to use it other places. somestores, like walmart for example, will have two different versions of a card. sowalmart has the walmart credit card, which can only be used at walmart and walmart-affiliated stores, and then they also have the walmart mastercard, which can be used anywheremastercard is accepted. and that's pretty much everywhere that credit cards areaccepted. so they're two very similar cards but they have different restrictions onwhere you can use them. the second thing to know before you apply for a store credit card is about credit limits. store credit cards tend to have lower credit limits than cash back or rewards cards that you
might get from a big bank. why is thatimportant to you? the percentage of your credit limit that you use each month is a big factor in your credit scores. so let me give a quick example.let's say i apply for store credit card and it might be typical to getapproved for a $500 credit limit. so i go out and spend $250. i'm now using 50% of myavailable credit on that card. now, on the other hand, imagine another scenario where instead of applying for the store credit card i apply for a cash back card from a big bank. overthere, i might be more to likely get approved for a $1000 credit limit. now if i go out and spend that same $250, i'm only using 25% of my available credit. now, the way that credit scoringmodels work, the closer i get to maxing
out my card, or the more i use relative tomy credit limit on the card, the worse it is from my credit scores. socredit scoring models like to see that 25% scenario more than that 50% scenario. so if you have low credit limits on your cards, like store cards tend to have, you could potentially damage your credit very easily bygetting up to the 50, 60, 70, 80, 90 percent utilization. the third thing to know before you applyfor a store credit card is that in general store credit cards have worse terms than cashback and rewards cards that you get from a big bank or a credit card that you can getfrom your local credit union. i already talked
about credit limits, but another thing thatretail store credit cards tend to have is a higher interest rate relative to othertypes of credit cards. so, if you can't pay off your full balance in a month and you haveto roll it into the next month, chances are you're going to be paying more witha retail store card than you would pay if you just had a credit card through yourbank or credit union. another thing to look out for with store credit cards is specialfinancing offers. so some retailers, like i think best buy had a deal like this, where you can get something and pay no interest for a year, or theymarket it that way. but, if you don't pay off that entire purchase by the end of thatspecial financing period, then they might
charge interest all the way back to whenwe first got the purchase, so when you first either got the card or made the purchase on the card or however the terms of that card work. so, watch out for specialfinancing deals, especially on store credit cards.you should always be reading the terms of a credit card before you apply and anything additional that you get about howthe card works once and get approved for card, but be especially careful aboutspecial financing deals. so i've talked a lot about things youmight want to look out for when you're getting a store credit card, but there aresome situations where a store credit card can be very beneficial and rewarding. there are two things that i think need
to be true in order to actually make themost out of a store credit card. the first thing is that you've done yourresearch. you've looked at all the terms of the card you're considering, you understand them, you've looked at the reward structure that that store offers and you understand that,and you've also thought about how often you shop at that store and will shop at thatstore in the future to consider whether that rewards card will be beneficial to you. the other thing to keep in mind, especially if you don't have any credit cards yet, is what yourcurrent mix of credit cards looks like. if you already have, let's say a cash back card, that you can use to earn cash back everywhere you shop, then it might make sense to get a store creditcard as a second or third credit card
especially if you shop at that store a lot and you know you can make the most of the rewards. the second thing i think needs to betrue in order for a store credit card to make sense is that you're using thecard responsibly. and what i mean by that is that you're paying off your balance on time, in full, every month. this is important for store credit cards orall other types of credit cards. if you're not paying off your full balance, therest of it's going to carry over to the next month. and, you're probably going to get charged interest on that. the value of your points, or cash back, or free pairs of underwear that you earned from this store credit card or your rewards credit card can very quicklycancelled out by the cost of all this
interest that you're paying bycarrying a balance. so, with any type of credit card you get, make sure you're paying it off on time, in full, every month. so i hope this video has helped you understand more about store credit cardsand how they differ from other types of credit cards. if you want to learn moreabout general use rewards credit cards that you can use any where for cash back or points check out our article "best rewards creditcards." i'm john ganotis from credit card insider. thanks for watching this video, and have a great day.
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