Moneying.com has some great tips about store credit cards.
Many times, you’re at a store paying for your items when the cashier asks “would you like to save 20% off your purchase today by signing up for our credit card?”. Sounds like a great deal, doesn’t it? You’re inclined to say yes, fill out the easy application and have the instant gratification of saving on things you were willing to pay full price for. Is it too good to be true though? It very well might be.
Retail stores have been tempting customers for years to sign up for credit cards with discounts, free gifts, and special promotions. While it may seem like a no-brainer to sign up and get instant savings, there are longer term implications that can affect your personal finance for years to come. Make sure you consider these five important things before signing up for a store credit card:
Your Credit Score May Be Impacted
Whenever you sign up for a credit card, especially one from a retail store, your credit report will most likely be pulled. While that doesn’t seem like a big deal, it might actually have a negative effect on your credit score. This is what is called a ‘hard pull’, which happens usually when a financial institution, like a credit card company, asks for your credit report. Hard pulls can decrease your credit score by a few points. While it is temporary and usually only stays on your credit report for about two years, it is something to consider, especially if you are applying for loans in the near future.
Read & Fully Understand the Terms
When you’re signing up for a store credit card on the spot at checkout, you’re mostly likely not taking your time to read the fine print. Make sure you fully read and understand the terms and conditions of your new card though. Store credit cards don’t have the greatest reputation. They’re notorious for having very high interest rates and fees, so you should thoroughly consider the terms before signing your name on the dotted line. You don’t want to be stuck paying a high interest rate in the long run. If it sounds too good to be true, it most likely is.
Consider The Sign-Up Bonus
The number one reason people apply for a store credit card is because of a special sign-up bonus. Often, stores will offer you a discount on your purchase that day or for a specified period of time. They might also give you free products and other perks. While it feels great to be able to save money also instantaneously, you should really consider the sign-up bonus before you commit. While saving 15% on your purchase seems like a no-brainer, is it really that much of a bonus in the long run? In the grand scheme of things, sign-up bonuses are almost insignificant when compared against drawbacks, like interest rates and fees.
Do Competitive Shopping
Consider your options before you sign up for your credit card. Every store has different cards and policies and you want to make sure to pick the one that is right for you. If you’re really set on opening a store credit card, look first at the retailer where you spend the most money. You’ll probably get the most return if it has a good rewards and points program. Opening a card at a store you don’t really go to often probably won’t benefit you much. And of course, compare the terms and conditions between all cards.
Take Your Time To Make A Decision
Finally but most importantly, don’t make a spur of the moment decision. Stores will often reel you in with an engaging sales pitch at the register and many customers feel almost pressured into making a decision right then and there. If you’re interested in signing up, ask how long their current promotions and sign-up bonuses are valid for. Also ask for an application to take home and if you can mail it in when you’re ready. Many companies will also allow you to apply online. This way, you can take your time to read the fine print and make a decision that is right for you (and your credit).
Store credit cards are very enticing but they aren’t for everyone. Make sure you understand all the ins and outs of the card before you sign up. Otherwise, you can really do some damage to your credit score and debt levels. Choose wisely!