• What You Need To Know About Opening Store Credit Cards

    Anyone who loves to shop knows that every time you checkout, you are enticed to open a store credit card with an extra discount. It seems that every department store, big box retail store, electronics store, home improvement store and warehouse store is now offering their customers an additional ten to twenty percent off their first purchase when they open and use a store credit card. And while it may seem like a great deal at the time, it is actually anything but.

    High Interest Rates

    Store credit cards carry some of the highest interest rates around. The rates typically reach well into the 20 percent APR range. With rates that high, any discount you receive for opening or using your card can be eliminated if the balance on a store credit card is not paid off before interest kicks in. And, if you are only making the minimum payment every month, the item that seemed like a such great deal, ends up costing you much more in the long run, due to the high interest rates.

    The Hit Your Credit Score Takes

    Whether you get actually get approved for the store’s credit card or not, your credit score will take a small hit simply by applying. When you apply for a store credit card, the credit issuing company pulls your credit scores. When your credit scores are pulled, they leave an inquiry on your credit file. This inquiry can lower your credit score for up to 12 months after the score was pulled. And the more inquiries you have on your credit score, the more of a hit your score has taken. While it may not seem like a huge deal, the inquiry hit can bump you out of the great or good credit range, raising your interest rates if you plan on purchasing a car, home or getting a new credit card within a year of that inquiry.

    Buy Now, Pay Later Syndrome

    Many people intend to use their store credit cards responsibly when they originally open them. You never hear anyone stating that they are going to open the card, charge it to the maximum limit and then struggle to pay it off for years. But unfortunately, this is the situation many people find themselves in when they open store credit cards. They see something on sale in the store ad or while browsing through the store and end up charging it to their store credit card. They simply think that they will buy it now, while it is on sale, and then pay off the balance when the statement comes. However, when the bill comes, they find themselves unable to pay any of the bill or more than the bill’s minimum payment. Perhaps they did not realize exactly how much they charged, or perhaps they couldn’t afford the impulse purchase, but this is a common scenario that is playing out far too often.

    To be fair, store credit cards do have a place in society. There are some that do offer great discounts for their customers on an ongoing basis or that offer great financing options for large purchases. These savings can be huge money savers for those who are strong-willed enough to resist impulse purchases and who pay the card off in full before the interest kicks in. However, if you are not strong-willed, can’t resist impulse purchases or find yourself already struggling to pay your bills, it is best to avoid store credit cards.

    If you already find yourself to be in over your head with store credit cards, My Financial Corner can find the best solution to help you out. Call us now and let us help you!

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