Department store credit cards and gas credit cards are good for establishing credit. But, 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 themDepartment store and gas credit cards are acceptable for starting out because they help you establish good credit. You should have no more than two department store and gas credit cards in your wallet at any time.
Do keep your balance less than 20% 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 $60.
Don't charge more than you can afford just to get rewardsA lot of department store credit cards and gas credit cards promise gift certificates or cash back when you charge a certain amount of money. 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.
Do pay your balance in fullThese types of 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. 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.
Don't make new charges if you haven't paid your balance in fullIt's a good habit to only use your department store or gas credit card when your balance is at $0. Otherwise, you could easily find yourself with an out-of-control balance that can take months, or years, to pay off.