5 Questions to Ask Yourself Before Saying Yes to Store Credit Cards
It’s a common occurrence to hear the question “do you want to save 15% off your items today?” when shopping at any major retail store. This typically is a way of enticing you to apply for a store credit card. Although retailers want you to make a split-second decision, in reality obtaining a store credit card warrants some thought. There are many things you need to take into account when deciding whether or not a store credit card will benefit your finances. Here are five questions to ask yourself before applying.
Will the Discounts, Promotions and Other Perks Really Benefit You?
Many store credit cards come with discounts, such as exclusive shopping days for card holders and other such rewards that will benefit you. However, if you don’t frequent the store enough then these rewards likely aren’t worth it. Additionally, some store cards offer their holders special coupons. However, be aware that simply signing up for the store’s online newsletter can give you access to many of these sales and promotions. It is worth asking a sales associate if they have a mailing list they can put you on, as you may find you don’t actually need the store card to save when shopping there.
Do You Want to Build Your Credit History?
If building your credit history is a financial goal of yours then obtaining a store card may help you in this endeavor. This is due to the fact that retail stores typically are more lenient when it comes to their customer’s credit profile. This means that you can more easily be approved for the card, even if you have a low credit score. Store credit cards can be a great way to build up your credit score, as long as you don’t carry too much of a balance.
Do You Revolve Your Credit Card Balances?
Store credit cards typically have APRs that are at least as high as 20%. It is often the case that these types of cards have a flat rate no matter your credit score. If you have a tendency to revolve balances then you should probably stay away from store credit cards. If you end up paying 20% or more from interest it will most definitely offset any money that you save from the discounts. However, if you pay your entire credit card bill every month then this shouldn’t be a problem.
Are You Prepared For an Initial Impact on Your Credit Score?
Any application for a credit card will cause a hard inquiry on your credit report, which will have an initial impact on your credit score. It will usually damage your credit score by anywhere from 10 to 30 points. If you sign up for more than one card then you’ll see an even bigger drop. Those that have multiple store credit cards are often seen as riskier borrowers, and so FICO will take multiple inquiries into account. Inquiries can stay on your credit card for at least two years.
Can You Handle the Temptation?
You should take into consideration your spending habits before applying for another credit card. If receiving coupons and seeing exclusive sales will tempt you to run to the store and buy unneeded items then a store credit card can cause you to go into debt. Be aware that once you’ve signed up for a store card, it is basically a “go ahead” for the store to start sending you endless shopping promotions and enticing ads. If you aren’t a disciplined shopper then it’s better that you avoid the temptations by not applying for a store card.