Rates are usually higher for store cards

Question: Are store credit cards worth signing up for, and how do I keep from getting so overwhelmed by it all?

Answer: It seems that every time shoppers go to a store, they get bombarded with offers to sign up for a store credit card, and it can be so confusing.

Stores are gung-ho about their cards because they help create customer loyalty and can help track customer buying habits. They’re also a profitable business.

For customers, store credit cards offer extra savings and provide a heads up on special sales coming up. They can also be an easy way for shoppers to establish credit history. But they need to be used wisely, experts warn.

Above all, if consumers can’t pay off their balances in full, it’s best to avoid store cards since interest charges are higher those of bank cards. Greg McBride, senior financial analyst at bankrate.com, said a typical store card is now charging interest of 19.8 percent, compared to a bank card, which currently charges around 13.5 percent.

Another issue to keep in mind is that taking out too many cards at once can actually hurt one’s credit score.

“They can definitely be a good deal, but they have to be used wisely,” said Andrea Rock, senior editor at Consumer Reports.

Here are some tips on how to manage the store credit card issue:

* Only sign up for store cards that give the best deals or immediate savings. For example, if a customer is buying a $2,000 couch, and can get 10 percent off upon signing up for a card, then he or she should consider the offer, said Mallory Duncan, senior vice president and general counsel at the National Retail Federation, the retail industry trade group.

Duncan also noted that shoppers should focus on stores that they like and are most loyal to.

* Don’t sign up for a slew of store credit cards, because such increased line of credit will hurt your credit rating. According to Rock, one should limit the number of store credit cards to one or two during a six- to 12-month period.

“What you don’t want is to open up a credit card in every store in the mall and leave a trail of credit inquiries in your wake,” said McBride. That’s a sign of an active customer, and credit bureaus are going to look at that with reservations, he said

At the same time, consumers shouldn’t close their lines of credit from store cards either, particularly right before applying for a mortgage or a car loan. Credit scores are based in part on your debt-to-credit ratio.

* Examine the policies of the card. That means looking at the grace period, from the end of the billing cycle to when the payment is due. McBride also notes that you should also look at the default policy. If customers miss one payment, the question is, is the interest rate going to climb up to 20 percent?