Store credit cards: To open or not to open

It never fails. When I’m out shopping and ready to make a purchase, I’m always asked the same question. “Would you like to open a store credit card?” My first attempt at an assertive “no” falls on deaf ear and I’m asked the same question over and over again but the second and third time includes all the perks and benefits.

The clerk: “If you open a card you’ll save 15 percent.”
Me: “No, I can’t afford another credit card.”
The clerk: “You’ll get first notice of sales and coupons.”
Me: “No, really I cannot afford another credit card.”

I once worked in retail so I know the pressure on sales associates to open credit cards. Often sales associates get additional financial compensation per new credit account. As a consumer, the key is to understand credit and how to use it. There is a lot of financial responsibility when owning credit cards. Using credit is not a bad thing. Being responsible, using credit wisely, and paying your balance off each month can lead to a high credit score which in turn will guarantee certain financial perks, like, lower interest rates on home and auto loans.

Below is a look into owning store credit cards and tips to help you effectively manage them.

Things to consider

  • New credit accounts for 15 percent of your credit score.
  • You need a diverse mix of credit on your credit report for the best score i.e. home loan, auto loan, student loans, and/or credit cards.
  • Store credit cards usually have higher interest rates ranging from 22.99 percent to as much as 29 percent.
  • There are perks to store credit cards such as discounts, reward points, coupons, and some even have short-term financing on major purchases.

Consumer tips

  1. Don’t open a store credit on impulse or feel pressured to open one. Having one store credit card isn’t a bad idea, especially for those establishing credit for the first time. Before opening a store credit card do your homework. Know what the interest rate is and shop around for better deals, understand the repayment options and how many days are in the billing cycle, and be aware of any potential fees associated with the card.
  2. Look at all the benefits of the card and make sure they are appropriate for your situation. If owning a store credit card offers incentives such as discounts or coupons and you frequently make purchases at that store it may be worth getting a store credit card.
  3. Only charge what you can afford to pay back monthly. Since store credit cards have higher than usual interest rates it is beneficial to pay the balance off monthly. Otherwise the interest will cause the balance to grow tremendously and will take longer to pay off.
  4. Don’t get tricked in with the incentives. Be wise when opening and using store credit cards. Buying something just because it’s on sale or you have a coupon is an easy way to get in over your head in debt.
  5. If all else fails, just say no and walk away. I do not trust myself with a store credit card. I know I would buy lavishly expensive things and not be able to pay the balance off at the end of the month. If this is you, your best option is to not own a store credit card.

Renee McGruder is a former communications coordinator and grant writer at MMI.