Dos And Don'ts Of Using Department Store And Gas Credit Cards

Department store credit cards and gas credit cards are good for establishing credit because they're credit requirements are typically more lax than regular credit cards. First timers or people who need to rebuild their credit can start with a retail or gas credit card. However, the terms and conditions make it hard to use these cards to your advantage. Find out how and how not to use department store and gas credit cards.

Don't have too many of them.

A hand holds a gas pump nozzle
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Department store and gas credit cards are acceptable for starting out because they help you establish good credit, but don't take on too many of these cards. They don't have as much impact on your credit score and carry a higher risk of being maxed out since they typically have low credit limits.

Do keep your balance less than 30% of your credit limit.

Higher balances lower your credit score and are more difficult to pay off. On a card with a $300 credit limit, your balance should never go beyond $90.

Department store and gas credit cards encourage spending and make it difficult to keep your spending below that level.

Don't charge more than you can afford just to get rewards.

A lot of retail store and gas credit cards promise gift certificates or cash back when you charge a certain amount of money. You could be tempted to charge a lot so you can reach the next reward threshold. The fact is you'll probably save more than they give you in rewards by keeping your purchases to a minimum.

Do make your payments on time.

Timely payments are important for establishing a good credit history. When you make your payments on time, you avoid late fees and penalty interest rates.

If you're using your department store or gas credit card to jumpstart your credit, making timely payments is key to build your credit to the point that you can qualify for a credit card with better terms.

Do pay your balance in full.

Department store and gas credit cards have high interest rates that make carrying a balance costly. When you don't pay your balance in full, a finance charge is added to your balance. Finance charges are higher on these credit cards than others because the interest rate is so high.

Each time you pay a finance charges, you put money into the credit card company's pockets that could have been going into your own. The higher finance charges also make it take longer to pay off your balance than if you had a lower interest rate and lower finance charges.

Don't make new charges if you haven't paid your balance in full.

There may be times that you can't afford to pay your balance in full. Maybe you accidentally charged too much this month or you had an unexpected expense that required the money you'd planned to pay off your credit card balance.

In these situations, it's best to wait until you've paid off your balance before making additional charges. Otherwise, you could easily find yourself with an out-of-control balance that can take months, or years, to pay off.