Store Credit Cards
In most major department stores, you see signs inviting you to apply for their store credit card. Some will even offer you a gift just for applying and others may offer you ten percent off your purchase made that day if your application is approved. If you have spent a large amount of money then the idea of ten percent off might appeal to you, but is applying for a store credit card a smart move? For the most part the answer is no for a variety of reasons.
One of the main reasons is that these store cards are offered by many major retailers are through either third party issuers or their own financing company. By using either of these you are going to have a high interest rate, which could exceed twenty percent.
Some stores state that since this type of store cards carry a higher minimum monthly payment the balances are cut much more quickly. The reason that they set the minimum payment at a higher payment is that if the customer is debt free they will do more shopping at their store.
Store credit cards can also be a threat to your credit score. The way that credit bureaus calculate your credit score with store credit cards is a different formula than what is used with a credit card issued from a bank or credit card company. If you are one of those people who have four or five regular credit cards plus a store credit car, it can make you look like a larger risk to credit agencies. If this happens, you will have a lower credit score, which can affect the interest rates that you would pay if you borrowed money for a car or new home.
On one hand have a diverse mixture of credit in your credit history it can aid in having a high score, but if there are too many lines of open credit that can signal danger to any other lender if you apply for more credit. The lenders may worry about your ability to pay your debts.
Before you sign up for a store credit card, make sure that the initial rewards are worth having another open credit card.
comments
Leave a Reply