Merchant Credit Cards: What you should look for, and lookout for

The holiday shopping season is just around the corner and many retailers are going to make a big point of offering their customers a store credit card. Oftentimes these offers come with a sign-up bonus in the form of a certain amount of discount on any purchases made that same day and, while it may be tempting to fill out that application and get that card, the question is simply this; is it a good idea?

To answer the question we put together this blog with several things that every consumer should consider before getting a merchant credit card. Enjoy.

  • How long is the cards grace period? This is the very specific amount of time that a cardholder has in order to fully pay off their balance without having to pay any interest. Most cards have a 30 day grace period but there are some that don’t which means that, once you make purchase, you start paying interest the very next day.
  • Are there any promotional financing terms, and what are they? Many store credit cards offer interest-free financing on new purchases. The CARD Act of 2009 requires that these terms extend for at least a six month period of time but it’s definitely a good idea to know exactly how much time that you’ll have pay off your balance before they start charging you interest.
  • What is the merchant’s standard interest rate? If you don’t pay your balance in full and on time every month, the interest rate that a credit card will charge you is called the “standard” interest rate. This rate begins when any promotional financing offer that they have extended to you expires. With rates ranging from 6% all the way up to nearly 30%, it’s a good idea to know what interest rate you’ll be paying once you are promotional period runs out.
  • Does the merchant have any other ways to get a discount? While the carrot that merchants hang in front of their customers is the immediate discount available if they sign-up for their merchant credit card, many stores will give you a discount without asking you to apply for a new credit line. If, for example, you give Kohl’s your email address they will send you a discount coupon via email. You can also get your Kohl’s coupon code from Coupon Sherpa to snag additional savings. Some merchants will give you a discount coupon if you “like” them on Facebook. Before you get that merchant credit card you should definitely ask if they have any other means of giving you a discount.
  • Are you trying to keep your credit score high or build new credit? Remember that every time you apply for a new credit card it will affect your credit score. If you have a limited credit history you will more than likely benefit from getting a new line of credit but, if you open up too many credit cards into short a time period, your credit score could actually drop (at least temporarily).
  • is the card that the merchant is offering a store charge card or an actual credit card? Some cards that are offered are valid only in the store where they were given whereas others belong to Visa or MasterCard and their wider payment network. While both can be worthwhile to have, you should definitely know which of the two types that you are getting when you fill out the application.
  • Is their sign-up offer generous? While saving 10% on the purchases that you make that day is very appealing, the savings might not end up being all that large. In contrast, there are many credit card companies that offer huge sign-up bonuses that will give you lots of points, lots of frequent flyer miles or be worth literally hundreds of dollars in cash. Since it’s unwise to sign up for every new credit card that you’re offered, it only makes sense that you should sign up for the cards that will give you the best incentives.

Simply put, knowing exactly what a merchant is offering when you sign up for their credit card, and knowing exactly the terms, interest rates and other details of the offer, is vital. If you go into a contract blindly you could end up paying a heck of a lot more money in fees and interest then you actually saved when you signed up. At the end of the day, the goal of these merchants is to make a profit. While their offer may seem “generous”, the real goal of offering you the card in the first place is to entice you to spend more of your hard-earned money.


4 thoughts on “Merchant Credit Cards: What you should look for, and lookout for

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