Warning: These Types of Credit Cards Can Cause Financial Woes…
Save 10% on your purchase today! No interest, no payments for six months! Buy a mattress today, sleep on it tonight, pay for it next year! It seems like no matter where you go, the ads for store credit cards practically shout out at you. At first blush, they seem like they offer a really good deal, too. But do they really? Let’s look at some of the factors that make a store credit card something you really should pass on by.
One of the biggest reasons to not get a credit card is that you end up in the long run with a large interest rate. Unless you are able to pay off the card before your grace period ends, all of that interest gets charged to you, and very often the store cards have double-digit interest, sometimes pushing 20% or more. That discount you got at the time of the sale ends up getting taken back, and then some. You can counteract that by turning around and paying off the card right after you get the discount on the sale. Many department stores allow you to make credit card payments right at the register, so you can leave knowing the bill is taken care of and you still got a good deal.
Do Retail Credit Cards Benefit You or the Stores?
Another reason to pass up a store credit card is the limited amount of time you get to take advantage of those card deals. For many stores, that discount is only good when you open the card, or maybe for 24 hours. After that, only a few stores will give cardholders special discounts or coupons that are exclusively for the cardholders. You can often find the same deals by agreeing to receive text messages. Some stores will tie their cards to charity donations, allowing you to spend money and automatically donate a percentage to a group like the Make a Wish Foundation or the American Heart Association. But those are few and far between.
Sometimes because you think you are saving money on that initial purchase, you end up buying more than you had intended and in the end, spending more than you had intended, too. That also negates the percentage savings for opening the account. It’s easy to get pulled into the excitement of the sale, particularly if it sounds like a big discount is being offered.
Be wary if you are applying for a home loan about a credit check done by the department store. Each inquiry lowers your credit score slightly. And, if you don’t make your payments on time for that credit card, your score will drop again.
Lastly, if you do sign up for one of those offers that lets you defer your interest and you don’t pay off the account by the deadline, you will be on the hook for all of the interest that has actually been accruing since the date of purchase. It is the single most important type of store credit that you have to pay for, because it can be a very costly error to pay even a day late.
Store credit cards have their time and place, to be certain. You have to be cautious and not get swept up in the moment when it comes to instant credit from a store. And remember, the store is quite literally banking on you getting caught up in the thrill of the chase for savings. But, if you are thoughtful and cautious, and you read over all of the terms carefully, you can actually get a very good deal out of it. If not, however, you should just skip the card and pay cash.
Store Credit Cards Pitfalls
