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.

  • The Consumer Federation of America (CFA) is an association of nonprofit consumer organizations that was established in 1968 to advance the consumer interest through research, advocacy, and education. Today, nearly 300 of these groups participate in the federation and govern it through their representatives on the organization's Board of Directors.
  • The National Council of Higher Education Resources (NCHER) is the nation’s oldest and largest higher education finance trade association. NCHER’s membership includes state, nonprofit, and for-profit higher education service organizations, including lenders, servicers, guaranty agencies, collection agencies, financial literacy providers, and schools, interested and involved in increasing college access and success. It assists its members in shaping policies governing federal and private student loan and state grant programs on behalf of students, parents, borrowers, and families.

  • Since 2007, the Homeownership Preservation Foundation (HPF) has served as a trusted, neutral source of information for more than eight million homeowners. They are partnered with, and endorsed by, numerous major government agencies, including the U.S. Department of Housing and Urban Development and the Department of the Treasury.

  • The mission of the U.S. Department of Housing and Urban Development (HUD) is to create strong, sustainable, inclusive communities and quality affordable homes for all. HUD works to strengthen the housing market in order to bolster the economy and protect consumers; meet the need for quality affordable rental homes; utilize housing as a platform for improving quality of life; and build inclusive and sustainable communities free from discrimination.

  • The Council on Accreditation (COA) is an international, independent, nonprofit, human service accrediting organization. Their mission is to partner with human service organizations worldwide to improve service delivery outcomes by developing, applying, and promoting accreditation standards.

  • The National Foundation for Credit Counseling® (NFCC®), founded in 1951, is the nation’s largest and longest-serving nonprofit financial counseling organization. The NFCC’s mission is to promote the national agenda for financially responsible behavior, and build capacity for its members to deliver the highest-quality financial education and counseling services.