“No, I would not like to open a line of credit to save 10% on my $4.99 purchase”.
I mumbled as the clerk offered me the opportunity to sign up for a store credit card before closing my transaction.
I hate when they ask me that, mainly because it’s usually for small purchases.
How many people fall prey to agreeing to predatory terms that can destroy their credit?
It should be illegal for you to make such an important decision in a matter of minutes while being rushed so that the clerk can take care of the next customers.
Does anyone even have time to read the fine print before saying yes?
I bet the answer is no.
Using a store credit card makes it easier to shop in those stores, but they usually come at a high price.
The following are the advantages and disadvantages of using store credit cards.
ADVANTAGES
- You don’t have to have good credit to get approved.
- You’ll get a special one-time offer just for signing up.
- There are rarely any annual fees. Some store credit cards offer ongoing rewards and discounts for being a loyal customer.
- If used appropriately, it may boost your credit score.
DISADVANTAGES
- You are more likely to look like a credit risk if you ask for too many credit cards from too many stores at once.
- Store credit cards usually have high variable interest rates ranging from 15%-30%, and you might even pay more in an economy with increasing interest rates.
- Don’t expect to go on a shopping spree because these credit cards usually offer low credit limits.
- You are limited to using your credit card only at that store, so make sure it’s a store you frequently use and benefit from.
- They usually carry a deferred interest penalty, which means you pay 0% interest for a set amount of time, but when the grace period ends, you will be charged interest on the full balance on the initial date you used the card.
Summary
Store credit cards, if used correctly, can help you build credit if other lenders have denied you, but the key is:
- To be disciplined in your spending
- Stick to a monthly budget
- And pay off your credit card in full every month.
Lastly, never say yes to anything that will be on your credit history for years without doing your due diligence. If the interest is going to be greater than your reward, it’s probably best to say no and shop around for better alternatives.
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