Savings Region

Rewards and perks make getting department store and gas credit cards very attractive to many consumers.  It’s very tempting to use these same cards to spend more than you should.  If you’re getting that department store card just so you can buy that pretty designer knock-off dress, think again.

Department store and gas credit cards are actually a good way to start fixing a damaged credit history or for starting out.  It’s usually a lot easier to be approved for these cards, even if your credit standing is not too good.  However, keep in mind that you’re getting these cards to repair your credit standing – if you overspend or use the cards wrongly, you’ll be right back where you started or even worse off.

Stick to One or Two. You really should not have more than just one or two of these cards.  Too many debts on too many open cards will again negatively impact your credit report.  Once you’ve managed to bring your credit standing back in good order, you may want to consider canceling these cards and go back to a regular bank-issued credit card with a lower interest rate to make your purchases.  Consider the rewards and perks that you have with these cards and figure out which of these you can really use to your best advantage.  For example, some gas cards offer discounts for travel, hotels, car rentals, insurance and even help you get your car repaired in case it breaks down while you’re on the road.

Pay the Balance Off On Time and In Full. Gas and department store credit cards usually have a higher interest rate and finance charges than regular bank-issued cards.  It’s not worth it to be paying off the interest for a pair of shoes that you originally charged for $100 and it defeats the purpose of rebuilding your credit history if you just end up incurring more debt.  Pay it off, pay it in full and on time and if you do have a balance owing, don’t charge any more until you’ve cleared the debt.

Avoid the Rewards Trap. These cards love to offer rewards such as gift certificates or even cash if you spend a certain amount.  If you’re spending more than what you can actually afford to pay back, you negate the purpose of the rewards.  Instead, know when you can use the rewards being offered to your best advantage such as holiday promotions and discounts without falling into the trap of overspending.

Stay Below Your Credit Limit. For regular credit cards, experts advise staying below 30%-50% of your credit limit.  For department store and gas credit cards, it’s better to stay below 20% of your given limit.  The higher the balance, the lower your credit score and again, the high interest rates for these cards make it very difficult to pay them off. Check that impulse to buy and buy and spend wisely.

Think of your gas and department store cards as a way to improve your credit history as you make your credit score rise every time you make a payment in full and on time.  Your chances of getting approved for a major credit card, mortgage or car loan will definitely be better as you rebuild your credit history.

Tags: Rewards Card, Store Cards