NEW YORK (CNNfn) - If you're like Mike Hughes, you've got more store cards than you can remember.
For all practical purposes, "I have zero," he said. "But technically I've got them all, Neiman Marcus, Saks, Macy's, Sears, you name it."
Customers open them for 20 percent off or 15 bucks cash back, then forget them. "A lot of people have the piece of plastic," Hughes, a financial-services analyst at Merrill Lynch, continued. "But is it clipped? Burned? In the bottom of the drawer?"
Running tabs probably occurred to retailers right after they sold cavemen their first bearskins. The Americans now charge an average of $691 on each store card every year. But there are fewer reasons to have store charge cards and -- wouldn't you know it? -- more and more places you can get them.
Sometimes using a retailer's card make sense. But advisors say most shoppers ought to overhaul the way they use in-store credit. There are several ways it can hurt. It's a tough climate for store cards. But that shouldn't make it tough for you.
They're just not that handy
First, store-specific cards are most useful to the retailer to keep you coming back. Stores used to force customers to use cash or their card, but with a few exceptions competition has made most open up.
"You used to need these other cards. They were important," Hughes said. "Now Visas and MasterCards are everywhere. You don't need [the store cards] anymore." Maybe there's a reason your store cards normally sit at home.
Smarter retailers now use cards to track spending so they can sell directly to you and promote a "relationship" with the store. Card holders might get a deal on their favorite makeup or power tools. But most store cards still basically limit options, meaning shoppers won't always get the best price.
Couple that with credit cards offering air miles and all manner of other incentives, and "if you have one or two major credit cards in your pocket and you're able to pay them off, you don't need a store card," said Steve Rhode, president of Debt Counselors of America Inc.
If you don't pay off your cards, you don't want to carry the balance on the store card. According to CardWeb.com Inc., store cards carry an average annual percentage rate (APR) of 21.2 percent, compared with 17.1 percent on a credit card.
There's a wide variety of credit-card interest rates, but shop around, said Monica Steinisch, spokesperson for Consumer Credit Counseling Service.
"You may find a credit card with as high an APR as a store card, but I don't know that you'd end up with a store card with as low an APR as some Visa and MasterCards," she said.
Store cards aren't exactly a bane
Store cards can be useful. If you open them, use the free credit -- up to six months, particularly on furniture -- and then close them, you're using them wisely, credit advisors say. But credit encourages you to spend more than you might otherwise and make impulse purchases.
"Debt is very seductive," said John Waskin, president of American Credit Counselors Corp.
He ran a report of 40,000 people who called for credit counseling. On average, they owe $13,000 in six unsecured debts, such as medical, credit-card and store-card bills, not including secured debts like cars and mortgages.
Store cards account for a good part of those six sources.
"All of them have a couple," Waskin said.
Overspenders typically max out one favorite store card, as well as their credit cards. The good news is, other store-card balances are fairly low, $300 or $400.
Limiting your options isn't bad for people who can't handle credit cards.
"It's not likely you're going to get into financial trouble at Victoria's Secret," Moshe Orenbuch, a credit-card analyst with Donaldson, Lufkin & Jenrette, joked. Retailers take 12 to 15 percent write-offs on their cards, three times credit card issuers. So the "sub-prime" market has been much more vibrant for store cards.
In fact, store charge cards can be very useful to people with bad or limited credit because they're easier to get, Rhode pointed out. But only if they pay them off and resist unnecessary purchases.
"If you're being turned down for credit cards due to some problem, do you want to have a store card that could get you into debt further?" he asked.
But they're not much of a boon
Store cards also prove attractive to younger people because they're easy to get. But that's not a great idea, according to CardWeb.com Inc. President Robert McKinley. He's seen banks turn down young credit-card applicants because they have little income and a large number of credit lines.
"Young consumers are probably best served if they can get a major bank card early on" to keep their spending options open and to build a credit history. They can open one or two store cards later, McKinley said.
Getting store cards doesn't prove you're particularly credit-worthy. And unless you use one a lot, it's not doing anything for your rating.
"If you're opening a card and then paying it off and closing it, that's not really building a credit history for you," Rhode said.
For people who aren't in financial difficulty, store cards can hurt their credit. Lenders may take lots of activity on your credit report as a negative. Others don't like to see people with too many lines of credit, even if they don't use them.
"You've got human beings, underwriters, looking at that credit report, and not all of them have the same guidelines," Waskin said.
People who plan to apply for a car loan or particularly a mortgage should cut down on store cards. Rhode said he knew a man who just missed the lowest interest rate on his mortgage, adding $91,000 to his mortgage over 30 years, because his score was slightly off.
Waskin suggests pulling your credit report once a year to make sure you don't keep cards open that you don't need.
"It's like spring housekeeping," he said. "You realize, 'Oh, I forgot I had that card that I opened ages ago.' "
What's more, if an account is closed in good standing and through inactivity, the credit-report annotation just shows that the creditor closed it, credit tracker Equifax Inc. (EFX) reports. To avoid any confusion over it closing because of a default, send the card to the company and ask them to close the account and notify the three main credit-reporting agencies that the customer closed it, Equifax spokesman Dave Mooney advised.
Make them make it worth your while
Store cards make most sense if you use one for a retailer you have a close relationship with.
"If you're very loyal to that particular retailer, it makes it easier to handle returns and so on," McKinley said.
Some companies such as Federated Department Stores Inc. (FD), which owns Macy's and Bloomingdale's, give rebates to card customers. Federated also started offering a "co-branded" Visa credit card in 1994 to customers who spend $1,000 in a year. Neiman Marcus (NMG), which still doesn't accept most credit cards, has a "frequent buyer" program called InCircle. Nordstrom (JWN) offers a credit card via its own bank.
But unless you use a store card enough to benefit from the points or freebies, you're just paying a higher cost of goods. Retailers are realizing convenience and a quick discount aren't enough.
"The future doesn't look bright for store cards," McKinley said.
The best retailers will reinvent their cards. But until a sore really makes it worth your while, keep paying off two credit cards, Rhode said.
"I think store cards missed their target, though some are starting to do a better job of it now," he concluded.