Why You Shouldn’t Open a Store Card
We’ve all had it happen. You walk into your favorite department or retail store and are quickly greeted by an employee asking you if you want to sign up for an in-store card. If they don’t catch you there, the store clerk will put you on the spot at the register and ask you if you’d like to sign up to receive 15 percent off today’s purchase. While in-store cards may seem harmless and like a good way to build up credit, they can actually do more harm than good.
You’ll Spend More
Retail stores offer in-store cards because they know they will make money off the interest and because they know you will spend more. Because you have an in-store card in hand that promises 5 percent off every purchase you make in-store with it, you will be more likely to return to that store and be more likely to spend more to increase your “savings.” The concept is much like couponing. Sure, you didn’t need 10 cans of Manwich, but you bought them all because you had a coupon to get 10 for $10 when you really only needed one for a $1.40.
The Benefits Are Terrible
Most credit cards offer cash back rewards, frequent flyer miles, or even college savings programs. In-store cards only give you benefits to be used in-store such as 10 percent discounts or $5 off your next purchase. Not only are the benefits bad, but you can only earn them by shopping in store – yet another way the card gets you to spend more money than you intended.
You Can’t Use it Anywhere Else
Another drawback of an in-store card is that you can’t use it anywhere but the store in which it came from. While this may seem like a perk, if you are actually interested in a credit card for credit building purposes, this is actually a detriment. Instead of getting a card that can be used only in one place, get one that can be used for an occasional gas purchase or dinner out – and that will give you points for those types of purchases.
The only time you should ever consider applying for a store based credit card is when a Visa or Mastercard logo is attached. Usually stores that offer cards backed by major credit card companies have better rewards programs, better interest rates, and can be used on outside purchases. Otherwise, stay away from the in-store credit card, and clip the Sunday coupon to get that 20 percent off your purchase that clerk keeps offering you.
