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Store Credit Cards....Should you or should you not?

Wednesday Jun 24, 2009

This past weekend I was in a retail store with my dad. I was getting a few items to help my already extremely good looking figure look even better. However, that is neither here nor there. As my dad and I approached the store check out, I could see the words already beginning to slide out of the employees mouth. We weren't even able to set our items down before we were hit with the bone chilling words. The employee was an innocent, sweet looking girl, but the words were thrown at us with a voice from the depths of hell. "Would you like to open a credit account with us today? You can save 25% on your purchases today." I was scared. I closed my eyes and pretended like I was invisible like I used to do as a kid when I thought there was a monster growling beneath my bed. I didn't know how my dad would respond. "I actually already have one" my dad replied. That was that, I freaked out for nothing.

This freak out got me thinking....Are store credit cards a good choice? If you can save 25% on your purchases why wouldn't you open an account? These are questions that I am sure are asked thousands of times a day at retail stores everywhere. With a little help from me, your battle tested blog leader, you will be able to answer that question next time you are standing at the check out and you are bombarded with those familiar words, "How about opening a credit account today?"

First we will explore the benefits of opening a store credit account. The most obvious one we can get off the table right now is the perks and discounts that come with the store account. Besides the initial discount you get from opening an account, most stores offer benefits for frequent shopper, continuing discount offers, and other store perks. These other perks can come in the shape of coupons and reward programs. Sounds good right?

Next, opening a store credit account is a great way to start building credit for someone who does not have any. It is also a good way for someone with poor credit to begin building their credit history back up. Retail stores are known to be much more lenient when it comes to the credit history of the individual that is applying. Thus, it is easier to get a store credit account. Before you jump out of your seat and speed away to your favorite retail store, it is important we discuss the not so attractive aspects of store credit cards.

The first thing I would like to mention, which is becoming quite common in all of my blogs, is store credit cards have high interest rates. This means that the interest you will be paying will far surpass whatever you might have saved with the discounts or perks. Be smart, high interest rates will kill you. Not literally...well,.....Maybe.

Continuing on, store credit cards typically have low credit limits. On one hand that can be seen as a good thing because you can't blow an insane amount of money. However, with a low credit limit it is easy to have a high balance, which can significantly hurt your credit score. Remember that....low credit limit + high credit balance = your credit score sucks!

Finally, opening a store credit card just ads more temptation to your spending habits. It only makes sense to open a store credit card if you have the cash flow to back it up. Furthermore, make sure this store is somewhere that you shop frequently so the discounts and perks are actually being used. Write that one down if you want. Should you or should you not open a store credit card? That is up to you. Now you are a little more educated for when the time comes. And if you end up opening one, let me know.... I think I deserve a T-shirt or pair of socks for all my helpful advice.

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