6 Reasons Why You Should Avoid Store Credit Cards
21 Sep
Every big store offers its own version of credit card. Their marketing staffs always try to tempt you into applying by offering 10% or 20% discounts, free invitations to special events, quick notifications on discounts or no interest for a few months. But if you plan to manage your cards smartly, you should only have less than three. The best choices are standard credit cards with better rewards and lower rates than store cards.
Here are the six reasons to avoid store credit cards:
1. High interest rates. Store cards usually charge you 20% of interest or more. So if you have a huge balance, you will soon be paying a lot more in interest than what you save on purchases.
2. Useless perks. Higher interest rates may quickly wipe out whatever benefits you earned with the card. And racking up many points on your card may not do much good if you plan to buy a huge couch.
3. Endless appeals to spend more and more. Research shows that buyers with store cards spend more than twice compared to regular buyers. Merchants believe that by observing you and they know that you’re more susceptible to certain types of advertisements. Reward programs are tailored to make you think, “What should I buy to quickly earn the discount or gift certificate?”
4. Misleading promotions. You may have heard this: Charge your refrigerator, high-definition TV or kitchen set to a store card to get no interest period for more than a year. Sounds wonderful, doesn’t it? But these offers come with a big catch. If you fail to make a payment, even one cent less, at the deadline date, you are required to pay for all the interest.
5. Unclear agreement. Impulsively applying for a store credit card at the promotional kiosk or cash register is always a rushed, thoughtless process. You will almost certainly miss essential information described inside the “Terms and Conditions.”
6. It can be bad for your credit score. Whenever you apply for a store card, the credit score drops about 5 points. You will suffer even more if you use more than one cards.
Many store credit cards are compatible with American Express and Mastercard, it means you can use them in most places, but any rewards can only be redeemed at a store, and they are often unimpressive. Try to keep your wallet or purse sleek by trusting only on a low-interest and rewarding major credit card.
