I’m sure we’ve all heard these words before: “Sign up with us today and save 15% on your next purchase!” If you’re the type to always lookout for ways to save money or pay down debt then these generous store offers probably seem like some no-brainers. We all want to believe that a store is offering a credit card with its logo printed on it because it has only your best interests in mind; percents’ off purchases, low interest rates, cash-back bonuses, promotions, etc. Well, let’s snap back into the real world and take a look at how the stores may be benefiting from your devotion and dedication:
A handful of store credit cards start with interest rates upwards of 20%. Unless you’re planning on paying the balance in full at the end of the month, you’ll end up paying a lot more for those shoes, even with the promotion or discount you got by signing up, and thus end up putting yourself further in debt.
With opening these lines of credit there are a few things you need to remember. First of all, cards with low limits are generally easy to max out, and unfortunately for us, this isn’t something a creditor likes to see. On the flipside, if you’re the type to pay for your purchases immediately, creditors still frown upon it – they call it “inadequate credit utilization”. Also, any new card usually decreases the average credit history length thus slightly lowering your FICO. Lastly, if you’re planning a big purchase, try to keep your distance from store card applications. While one may not make a difference, those credit inquiries can quickly add up, costing you plenty in higher interest on a mortgage or car loan in the near future.
- Promotions, Deals and Discounts
As an exclusive store card member you have probably received discounts and promotions not available to the rest of the world. Your store card may offer rewards or cash back if you spend enough thus enforcing you to spend more. You have to remember, putting yourself in debt or not paying the bill in full will result in interest charges that will quickly negate any wonderful rewards you’ve received. In my opinion, if you have another card with a rewards program, you’re probably better off using that one, especially since you can build up rewards faster (by using it with every purchase, not just one store specifically).
As with everything, exceptions do apply here. Store cards usually have lower standards for approval, so if you’re just starting out or don’t have much credit history you may want to consider getting one of these. With big purchases, you may find that the store offers no interest for a year, or a big percentage off (this works especially well when you can pay off the balance by the end of the month resulting in big savings for just signing up).
Store cards can be a blessing or a curse - like with everything else - it all boils down to the user.
If you need help with your financial situation or would like a free consultation with a certified debt specialist you can always apply here and receive a call within minutes, or call (888) 703-4948.