It is likely that you’ve encountered a store’s pitch to sign up for their credit card that offers discounts and rewards. But should you sign up? Not all of these cards are bad and some offer great benefits… while others can just cause you to accrue high-interest debt.
Great Discounts Off the Bat
When signing up, it is most common that you will receive some type of discount at the register, and then you continue to receive discounts year-round. Cardholders may also be offered exclusive deals as a reward for loyalty. Some retailers also offer bonus programs in which you may be able to earn reward points to redeem for discounts at the store.
Not all, but some cards are affiliated with Visa, MasterCard, or American Express, which means you can use the card elsewhere.
You may also be offered zero percent financing, which is usually 18 months of interest-free credit. If you have one big purchase to make, this can be beneficial, but if you get caught up in making many smaller purchases in this time, it can get out of control.
Improve Your Credit Score
By using and paying off your card on a regular basis, your credit score can make a good impression by creating a good pattern of credit habits which will help your score.
High Interest Rates
Although these pros are tempting, there are also come cons to take into consideration as well. The first is that many cards come with high interest rates that can be up to 30%. Also, if you don’t pay off your balance, the store may add on a significant number of months worth of interest to what you owe.
Hit to Credit
If your credit balances are already high, your credit score can suffer if you have too many credit inquiries. Also, creditors may check how much existing credit you have available when reviewing loan applications. If you have already blown through all or a good portion of the credit given to you, it is unlikely that lenders will give you more credit. This is especially true if you had a high credit limit to begin with.
Having a store card may tempt you to spend more money through the use of strategic business techniques used by the store. By giving you discounts, they hope you’ll overspend once you get there.
Making Your Decision
In making this decision, here’s what you should know: if you shop regularly at a store and the card will get you a discount, it may be useful to you to sign up. When you do, make sure you are only purchasing what you need to without buying any extras or making a special trip because there are discounts for cardholders. Also, be sure that you pay the entire balance each month to avoid doing damage to your credit score.
Before signing up for a store credit card, be sure to take these factors into consideration. If it is best for you, sign up for a store credit and see how it can benefit you!