I'm sure you have been asked time and time again when you buy something that costs more than a couple of hundred dollars whether you would like to apply for a store credit card. The clerk usually promises you some sweet benefit like 10% off of the purchase or free interest for a year.
Here's how it usually works ...
Most stores offer two types of a credit cards ...
1) Private Label store cards - These can only be used in the store/chain you are shopping at and you will often receive have deferred interested for anywhere between 3 and 12 months. Usually the APR (annual interest rate) is high and there is no annual fee. What the stores are hoping is that 12 months later you will be one day late paying your bill and then they will charge you the high interest rate and frequently a late payment penalty to boot. Often there is no rewards program associated with these type of cards. They are great for deferring interest, but only if you pay them off on time. I would recommend scheduling and appointment in your date book 11 months after you get one and paying it off a month early just in case.
2) Co-Branded credit cards - These are typically MasterCard or Visa (sometime Amex) cards that also have the branding of the store on them. Since most stores aren't also banks, they will partner with a bank to issue you one of these bad boys. The APR/interest rates are usually OK, but not spectacular, on these cards and they also rarely have a an annual fee (usually with airline co-brand cards). Frequently they will have a loyalty programs attached to them that will reward you with points or cash back for all of the purchase you put on the card with a premium for purchase made at their store - for example 5% back - often in the form of gift certificates that can only be used at their store - that for all of the purchases you make at their store and 1% back for all of the other purchases you make. Obviously what they are hoping is that you value free merchandise at their store enough to shift your payment habits and use their card instead of another card. What I recommend here is getting co-branded cards from your favorite stores, but only use them when you shop in the store, becuase - hey - 5% at the GAP or Macy's ain't bad, especially if you are a regular customer anyway - just don't get sucked into spending more than you otherwise would because you have credit (that's what they're counting on). And, it's probably not in best interest to use them for your other purchases as you can usually get a better rewards deal than 1% towards gift cerificates at the GAP such as 1% cash-back that can be used anywhere.
Happy shopping,
Moe