By Sabrina Karl
We’ve almost all experienced it: a store check-out clerk asking if we want to save 10, 15, or even 20 percent off our purchase by simply signing up for a store credit card.
It can be tempting, especially if your cart is full that day. But the impacts of saying yes last much longer than simply scoring the discount that day — to the point that for many consumers, signing up for the card will quickly become a losing proposition.
To be fair, store cards can make sense in a few scenarios, but all of them involve paying off your full card balance every month. That’s because retail cards tend to charge interest rates averaging 5% more than standard bank cards. So carrying a store card balance is definitely something to avoid.
Other strikes against saying yes to that store card is that it will impact your credit report. If you have very good credit, adding a store card and managing it well won’t have a huge impact. But the credit pull will cause a slight ding to your score.
In addition, having the store card may cause you to spend more. Temptation comes in the form of adding more to your purchase on the day of your initial discount, and being enticed to spend when you get teased with special “member discounts” in the mail.
True, if you have limited or bad credit, store cards can be easier to open than bank cards and could help you build better credit. But again, all of this hinges on managing the card very responsibly and not carrying a balance.
The top advice is to decide on store cards away from the checkout. Do your homework in advance, including whether a general cash rewards card may be a better move.