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Four Reasons Store Credit Cards Suck

Things are getting back to normal, aren’t they? The credit crisis of 2008 and 2009 gave consumers a temporary reprieve from the endless credit card offers. Not only are we once again getting offers in the mail but when we purchase at stores ranging from Walmart to Macy’s we’re constantly asked to open a store credit card.

The offer seems enticing. In less than a couple of minutes we can apply for and agree to a credit card that lands us a big discount on the days purchases. 10% to 20% off of a big purchase is hard to turn down but before saying yes, remember that the card may not be as customer friendly as you think.

They Know About You

According to Creditcards.com [3], the average credit card debt per household is $15,799. When they offer you that unbeatable deal on today’s purchases, they know what’s going through your mind. All you have to do is open the card, get your big discount, pay down the balance with the money you were going to use anyway, and then close the card.

But the companies behind the store credit cards know that the best intentions don’t always pan out to responsible action. Chances are you’ll continue to use your store card without paying down the balance especially since the store will send you those “members only” coupons that allow you take an additional 10% off if you use your card. They know your habits and they’re going to do everything they can to make sure you abandon your original idea and keep your card active and amassing interest.

Don’t Cancel

Cancelling the card may not be the best idea, anyway. Part of your credit score [4] comes from the amount of time you’ve held your credit accounts in good standing. In fact, up to 15% of your credit score may come from the longevity of your credit. If you have the discipline to open a card and pay it off right away, consider using the card a few times per year. Make a small charge and pay it off before interest is charged.

Interest Rate

Store credit cards come with interest rates that may be as high as sub-prime credit cards. They’re typically that high because the requirements to be approved for a low credit limit store credit card is often very low, so they charge higher interest to offset the risk they take on. If you carry a balance on one of these cards, that 10% to 20% discount you received when you opened it will be quickly wiped out by the interest you pay.

Just Say No

It’s tempting to get that big discount and the person at the register will do everything they can to get you to say yes but there are very few reasons to open a store credit card. If you already have a credit card in your wallet, it probably has a better interest rate and its one less bill that you have to keep track of at the end of the month.

Do you have a store credit card? Are there perks that you get with your store card that outweigh the problems?

(Photo: qiaomeng [5])