Store Credit Cards

You may have experienced this scenario:

You: Thanks for ringing up my items today!

Cashier: No problem! That’s why they pay me the big bucks.

You: Haha

Cashier: By the way, you can save 20% on your purchase today if you sign up for our store credit card!

You: Goodie goodie! I have been to 46 stores today and they ALL offered me this same thing! And I signed up for ALL of them! Now I have 46 credit cards-one for each of my favorite stores (including Van Gogh’s Ear)!

Well, maybe not this exact scenario.

How do you know which cards to get and which to avoid, or should you avoid them all together?

Do Your Research

I found the following website helpful in finding information about any store credit card you can imagine:

http://www.bessed.com/departmentstorecreditcards/

There you will find links to the “Top 46” department store cards. A brief description of each is given. Now to answer a specific question posed by everyone’s favorite Bolivian Blogger:

“Can you compare a couple different store credit cards? For instance, we recently got a Nordstrom credit card (because [Mr. “Everyone’s Favorite Bolivian Blogger”] buys clothes there) and we are considering getting a Costco Am Ex card but I am wondering what the benefits and costs are to signing up for cards like that. Also, can you look into Banana Republic cards because . . . a friend of mine is wondering if she made a mistake. Okay thanks stefuinvesting. Happy transactions!”

Thanks for your question!

Nordstrom (Ranked #13 on the above-mentioned website)

(Good)

– This card offers you 2 “reward points” for every dollar spent at Nordstrom.

- The Visa Signature and Visa Signature cards also offer 1 “reward point” for every dollar spent anywhere else.

- 2,000 “reward points” means a $20 Nordstrom gift card. (Depending on where you racked up your points, that is about a 2% return on your spending).

- No annual fee

(Bad)

- If you only have the regular Nordstrom Retail card, you get no additional points for using it outside of the Nordstrom stores. You’ll have to spend $1,000 at Nordstrom to get your $20 (oh, and you only have 3 years before those points expire).

- Minimum APR of 18.9%

Costco AMEX (Ranked #3)

(Good)

- 3% cash back for money spent on gasoline and restaurant purchases

- 2% cash back for money spent on “travel.”

- 1% cash back on everything else!

- No limit to the cash back earned

- Cash back is actually CASH!

- No late fee if balance is under $250.

- No annual fee

(Bad)

- Although there is no annual fee, you must pay for a Costco membership.

- 15.24% APR. (Plus a 0% APR for the first 6 months).

Banana Republic (Ranked #42)

(Good)

- 5 Reward points for every $1 spent at Banana Republic, Gap, Old Navy, Piperlime, and Athleta.

- 1 Reward point for every $1 spent everywhere else.

- 1,000 points gets you a $10 gift card. (If you got all those points at one of the BR stores, that’s a 5% return on your spending).

(Bad)

- Between 17% - 23% APR depending on the type of card (Visa vs. “Banana Republic Credit Card.”)

- Late fee is $15 even if you only have a $15 balance.

Hope that all helps.

In General

One more comment about getting credit cards. A lot of people aren’t sure how just having a credit card will affect their credit score (even if you never use it). Here’s a hint: when checking your credit, creditors look at all of your credit cards and pretend that they are completely maxed out to their limits. So even if all of your cards are empty, having too many can still hurt. Specifically, creditors don’t want your “debt-to-income” ratio to be over around 37%. Take all of your monthly debt obligations (including rent) and divide by your monthly income. To get the same number that the creditors will look at, make sure to estimate what your monthly credit card payments would be IF you were pretending that they were maxed out.