There are a very few situations in which a store card, used responsibly, can be a positive thing. Those with limited credit histories may find themselves more likely to be approved for one than for a mainstream credit card. And, for those consumers, having one can help establish their creditworthiness.
Store credit cards and the Lazarus effect
- Private-label transactions are cheaper for the retailer to process because they have to pay lower or zero swipe fees.
- Store cards can help a retailer to build a relationship with a customer thereby promoting loyalty.
- Oddly, they carry a low credit risk. Perhaps because their credit card rates are so high, consumers tend to repay store-card debt first and so default less.
- They increase sales. If you can't afford to buy something with cash or a mainstream credit card, you might go ahead and buy it if the store's offering you the finance you need.