Are the Discounts Worth Getting That Store Credit Card?

OK, you’re holiday shopping and actually having some luck. You’ve hit a big box retailer, your favorite clothing store, and the fancy kitchen place and nailed gifts for half your list.

And every time you check out, the clerk offers you a big time discount, like 30% or 40% — but only if you open a store-branded credit card. When you’re spending a hundred dollars or more, that’s a serious savings. So what’s the catch?

First things first: If you won’t be paying off the entire credit card bill when the statement comes, you probably want to skip it. Your finance charges are likely to cancel out the discount and store credit cards generally carry higher interest rates than other credit cards.

Second: If having that card is going to tempt you to overspend, skip it. You can’t “save” money on purchases you weren’t planning to make in the first place.

Third: Opening an application for a new card might affect your credit score, which impacts your ability to borrow money at lower interest rates. Now, applying for one new card might only lower your score by 5 points (or less), which isn’t much on a scale that goes up to 850. And the discount on a large purchase might be worth that modest ding, especially if you regularly shop at that store and can take advantage of the rewards or perks.

But applying for a new card can have a bigger impact if you have a shorter credit history or few credit accounts. Applying for too many cards too quickly can also damage your credit score. It all depends on your circumstances.

So what? Taking advantage of a credit card promotion might make financial sense, but only if you can pay off your balance in full and on time. And if you haven’t borrowed much money or have a shorter credit history — maybe you’re young, rent your home, or have always used debit cards — it may make more sense to use a card you already have.

Related Reading

•   How New Credit Impacts Your Credit Score (myFICO)

•   Should You Open a Store Credit Card for the One-Time Discount? (NerdWallet)

•   How Many Credit Cards Should You Have? (Investopedia)

photocredit: iStock/Drs Producoes

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