It’s a Trap!

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What would Admiral Ackbar say? Is store credit a trap?!

You have to give them props, those big box and department stores we all love so much: they’re pretty crafty. Not only do they lure us off of our couches and into their stores with their flashy commercials, and then use all kinds of creative techniques to get us to buy as much as possible while we’re there, they also know just when to hit us with their final sales pitch. Right at our weakest moment, when we’re face-to-face with the huge total of what we’ve culled from their aisles, they lower the boom:

“Would you like to save 15% by opening a _____________’s card today?”

It sounds like a great deal, right? All you have to do is open a store credit card and you’ll see a huge drop in that bill you managed to rack up. And plus, you’ll be eligible to get all kinds of other savings and specials when you use the card in the future. This is a win-win!

Well, not so fast. As with all other “great deals” out there, store credit cards aren’t such a bargain for everyone. Before you decide to open one (or open one more), take a look at the pros and cons below to see if it’s really such a good idea after all:

Pros of Using Store Credit Cards

  • The savings! Most stores give customers a hefty discount on their first purchase with the card.
  • Continued savings and promotional rates – store cardholders usually qualify for special deals and steals that other customers don’t.
  • Builds credit; if you’re having a hard time getting credit, using a store credit card is often a good option because their lending standards aren’t as strict as those of banks. This a good option for building your credit if you don’t have easy access to other methods.

Cons of Using Store Credit Cards

  • Greater potential to get into debt. If you’ve gotten in over your head with credit cards in the past, store credit cards are a hazard you should probably bypass.
  • Potentially harmful to your credit score; because most store cards have very low limits, just a few purchases can cause you to approach your credit limit on the card. This can hurt your credit utilization ratio, particularly if you don’t have other loans or credit cards on your credit report to balance it out.
  • More temptation to spend. People with store credit cards get bombarded with emails and mailings about sales and promotions, making it harder to say no to marketing ploys. If you know you’re easily persuaded to part with your money, a store card might be dangerous for you.

The takeaway: before you sign on to a store credit card, think it through and decide if the card is really going to save you that much money over the long term.

About Lindsay Meredith

Lindsay is a high school teacher and personal finance blogger. She lives, works, and plays in the Washington, D.C. area.

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