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How many times have you been told by a store employee that you could save an extra 10% if you open a store credit card? While it appears that this is a great way to save on your purchase, there may be long-lasting effects if you do apply for a store credit card. Detailed below are a few things to consider before you apply for a store credit card.
1. Having a store credit card tends to encourage more spending at that specific store. When you multiply that by multiple stores, you can accumulate a lot of debt quickly without consciously realizing it. Each store will have its own due date and minimum payment requirement. If you do not keep track of the various credit accounts, it is easy to overlook one card. I know from personal experience that once I obtained one store credit card, I was easily convinced to apply for additional store cards. I ended up overextending myself without realizing it.
2. When you apply for new credit, it will affect your credit score, usually lowering your FICO score. If you obtain multiple store credit cards, this may adversely affect your overall credit profile. Even if you pay off the balance on a store credit card, as long as the credit line is open it will affect your credit profile. Your credit profile will reflect a higher amount of revolving credit and limit your ability in the future to apply for additional credit lines. This may be very important if you are considering applying for a loan for a large purchase such as an automobile or home.
3. As with any credit card, if you do not pay off the balance within the first billing cycle, you will incur finance charges and pay interest. Interest rates for store credit cards are much higher when compared to interest rates of a traditional credit card like Visa. If you do not make the minimum payment required by the due date, you could incur additional charges such as a late fee. If you go over the credit limit on the card, you could be charged an additional fee.
Keep in mind that any retail store will accept other credit cards that you may already have, such as Visa or MasterCard or even debit check cards. A store credit card is not necessary to purchase any items from that store.
