Do You Really Need (or Want) That Store Credit Card?
Every time you check out at a store, you are likely to be asked if you would like to apply for a store credit card. The cashier usually tells you that you will get a certain percentage off of your purchase, which may seem like a great deal, especially if your bill is large. It pays to look beyond the perks and to the potential pitfalls, however, before you begin to rely too much on store credit cards.
Would You Like To Save 10% On Your Purchase Today?
Let’s say that you’re checking out at a discount retail store, and you are purchasing approximately $400 worth of merchandise. The cashier asks if you’d like to apply for a credit card with that store, saying that you will earn 10% off of that purchase, which amounts to $40.
It’s probably tempting, so you pause for a second, and decide to complete the application. Because you are in the checkout line, with several other people behind you, you don’t take the time to read the fine print carefully, instead focusing on what you will save at this time.
Do You Have A Store Credit Card?
If you were to use the store credit card conscientiously from here on out, you would probably save several percentage points each time you shop at that retailer. If you shop there often, and are religious about paying off your bill every month, you might come out ahead – that is, if the card doesn’t charge high annual fees. Even so, if you save enough at that one retailer to offset the annual fee, then you are still getting a fairly decent deal.
If, however, you are not religious about paying your entire balance off each month, store credit cards can be a terrible decision. These cards usually have exorbitantly high interest rates — much higher than a typical bank card — so your purchases at the retail store and others soon become very, very expensive if not paid off monthly.
“Regular” Credit Cards Are Usually A Better Deal
For most consumers, finding a regular bank-issued credit card that has a rewards program (where you can earn rewards on ALL of your purchases, not just on those from a particular store), and has a lower interest rate, is usually a better choice.
Next time you are prompted to apply for a store credit card, decline the on-the-spot invitation, and take the application home and review it carefully. If it is a good deal, once you have considered all of the possibilities, then apply for one the next time you are going to make a large purchase; if not, you haven’t lost anything!