Store Credit Card Promotions Can Be Very Costly
The holiday season has been extended for shoppers, it began November 1st and bargains seem to be flashing constantly before our eyes in stores and online. To top it off, when you're lured in by the lights and decide to make a purchase, the store clerk asks you if you want an EXTRA bonus for signing up for a store credit card. Who wouldn't want that!
You might not want it. Do you make and stick to a holiday budget or are you an impulse buyer? How much merchandise will you end up buying and how long it will take you to pay it back? What is your current credit score and how much debt do you have already? These are very important questions to ask yourself before signing the application for a new store card.
A credit card balance is just like any other unsecured loan. It’s a loan that you have to pay back, it will affect your credit score and usually carries a high interest rate of 20% - 29%. If it’s strictly a store card without an affiliation with Visa, Mastercard or American Express, it may be easier to get if you’re looking to establish credit, and the limits are generally low ($500-$1000). But to establish a good credit history, you need to pay your balance or minimum on time and ideally pay it off within a few months.
However, with an established credit history, getting a few store cards may do you more harm than good even factoring in the super-duper holiday deals. According to a recent article on Forbes MoneyBuilder by NerdWallet, opening store cards to get the discount deal of the day can hurt you in the following ways:
1, The store card has a low limit but if you find all sorts of bargains and make purchases that bring you close to your limit, it will hurt your credit score, since credit availability is a big component of your score.Continued on the next page