Be careful with store credit cards
November 5, 2008
The holiday shopping season is fast approaching.
Stores are starting to roll out sale prices and other special offers. There’s a good chance that at least once during your holiday shopping you will be offered a store credit card when you make a purchase.
These offers seem very enticing because you are usually offered a certain percentage off of your purchase if you sign up for a store card. There are several things to be aware of before you say yes to that card.
The store card may carry a very high interest rate. If you charge your purchases to this card and can’t pay it off immediately, you could end up spending more in interest charges then you initially saved.
Also, opening store cards could hurt your credit score.
First of all, every time a lender requests your credit report and credit score, it puts a little ding in your credit score. Your credit score may only be lowered by a few points, but if you apply for more than one card in a day, those few points are going to add up. This could be damaging if you already have a low credit score.
Second, when you apply for several lines of credit within a short amount of time, this shows up on your credit report. It could be a red flag to lenders who may wonder why you are suddenly in need of so much credit.
If you need to use a credit card while holiday shopping, you are probably better off to use a card you already have that has a low interest rate.
If you do decide to open a store credit card, make sure you know the interest rate and any fees associated with the card before you sign up. Only charge what you can afford to pay off right away. And finally, only open one card. Do not open cards at every store that may offer you a card.
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