Home > Credit Cards > Should You Sign Up for a Store Credit Card When You’re Shopping This Weekend?

Comments 0 Comments

“Would you like to save 15% today by opening up a store credit card?”

It’s Labor Day weekend — a big shopping weekend for many Americans — which means you might have to answer that question a lot. Retailers tend to have big sales for Labor Day, and you may be tempted to open a store credit card in order to save a little bit more, but that opportunity to save isn’t always worth it.

Store credit cards can be worthwhile if you’re a frequent shopper or making a large purchase at the store (most cards offer a sign-up discount), but this subset of the credit card market can have big drawbacks for consumers. Consider these things before letting a cashier run your credit to apply.

Opening a New Card Can Hurt Your Credit

Applying for a new loan or credit card results in a hard inquiry on your credit report, which tends to shave a few points off your credit score. Depending on where your credit sits and what your financial plans include, that may or may not be a big deal. For example, if you plan to buy a house in the next few months, a few credit score points could mean you get a higher interest rate on a mortgage, which can translate into thousands of dollars over your lifetime.

A new account will also lower the average age of your credit, which also has an impact on your credit score. At the same time, you will be increasing your available credit with the new card, so as long as you don’t also rack up a high balance on the card, the new account could help your credit. Take a look at your credit score before you apply for a new card — you can get your credit scores for free on Credit.com — and that information should help you decide whether you want to take on another account.

The Interest Rate Might Be High

Retail cards tend to carry higher interest rates than no-frills credit cards. That’s not a big deal if you intend to pay the balance in full, but if you carry a balance, the amount you pay in interest will almost certainly outweigh any discount you may have received for signing up in the first place, so store credit cards tend to be a better option for those who don’t plan on carrying a balance. Some cards have promotional 0% financing, which can make the store card a good strategy if you’re buying something expensive and want to spread out the payments, but make sure you understand the terms of that promotion before you agree to it. You may be better off opening a non-retail credit card with a more competitive 0% financing offer. For example, the winner of this year’s best balance transfer credit cards in America ranking is the Chase Slate, which offers 15 month of 0% financing. (You can read a full review of the Chase Slate here.)

You Could Get a Better Deal With Another Card

If you have good credit and are interested in leveraging credit cards as a way to save money, you might be able to get more out of a rewards credit card that you can use outside a specific store.

A card that offers you cash back or airline miles for your purchases, no matter where you make them, could add up to a lot of savings, if you’re strategic in how you redeem them. That being said, rewards cards also have high interest rates and need to be used carefully. Additionally, some store credit cards offer a card through the major credit card networks that allow you to use them at other retailers, so you can earn rewards without severely limiting your shopping options.

You May Be Tempted to Overspend

Regular shoppers can benefit from using a retailer’s credit card for their frequent purchases, but you need to consider the cost of loyalty. You might end up spending more on an item you could get cheaper elsewhere, just because you have the store credit card. Additionally, you may go shopping at the store more often, even when you don’t need to, because you feel tied to the retailer by the card in your wallet.

As with many great financial tools, you have to consider the costs and benefits before opening a new credit card, whether it’s from your bank or your favorite store. Take the time to think through the decision, so impulsivity doesn’t land you in debt.

Note: It’s important to remember that interest rates, fees and terms for credit cards, loans and other financial products frequently change. As a result, rates, fees and terms for credit cards, loans and other financial products cited in these articles may have changed since the date of publication. Please be sure to verify current rates, fees and terms with credit card issuers, banks or other financial institutions directly.

More on Credit Cards:

Image: iStock

Comments on articles and responses to those comments are not provided or commissioned by a bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by a bank advertiser. It is not a bank advertiser's responsibility to ensure all posts and/or questions are answered.

Please note that our comments are moderated, so it may take a little time before you see them on the page. Thanks for your patience.

Credit.com receives compensation for the financial products and services advertised on this site if our users apply for and sign up for any of them.

Hello, Reader!

Thanks for checking out Credit.com. We hope you find the site and the journalism we produce useful. We wanted to take some time to tell you a bit about ourselves.

Our People

The Credit.com editorial team is staffed by a team of editors and reporters, each with many years of financial reporting experience. We’ve worked for places like the New York Times, American Banker, Frontline, TheStreet.com, Business Insider, ABC News, NBC News, CNBC and many others. We also employ a few freelancers and more than 50 contributors (these are typically subject matter experts from the worlds of finance, academia, politics, business and elsewhere).

Our Reporting

We take great pains to ensure that the articles, video and graphics you see on Credit.com are thoroughly reported and fact-checked. Each story is read by two separate editors, and we adhere to the highest editorial standards. We’re not perfect, however, and if you see something that you think is wrong, please email us at editorial team [at] credit [dot] com,

The Credit.com editorial team is committed to providing our readers and viewers with sound, well-reported and understandable information designed to inform and empower. We won’t tell you what to do. We will, however, do our best to explain the consequences of various actions, thereby arming you with the information you need to make decisions that are in your best interests. We also write about things relating to money and finance we think are interesting and want to share.

In addition to appearing on Credit.com, our articles are syndicated to dozens of other news sites. We have more than 100 partners, including MSN, ABC News, CBS News, Yahoo, Marketwatch, Scripps, Money Magazine and many others. This network operates similarly to the Associated Press or Reuters, except we focus almost exclusively on issues relating to personal finance. These are not advertorial or paid placements, rather we provide these articles to our partners in most cases for free. These relationships create more awareness of Credit.com in general and they result in more traffic to us as well.

Our Business Model

Credit.com’s journalism is largely supported by an e-commerce business model. Rather than rely on revenue from display ad impressions, Credit.com maintains a financial marketplace separate from its editorial pages. When someone navigates to those pages, and applies for a credit card, for example, Credit.com will get paid what is essentially a finder’s fee if that person ends up getting the card. That doesn’t mean, however, that our editorial decisions are informed by the products available in our marketplace. The editorial team chooses what to write about and how to write about it independently of the decisions and priorities of the business side of the company. In fact, we maintain a strict and important firewall between the editorial and business departments. Our mission as journalists is to serve the reader, not the advertiser. In that sense, we are no different from any other news organization that is supported by ad revenue.

Visitors to Credit.com are also able to register for a free Credit.com account, which gives them access to a tool called The Credit Report Card. This tool provides users with two free credit scores and a breakdown of the information in their Experian credit report, updated twice monthly. Again, this tool is entirely free, and we mention that frequently in our articles, because we think that it’s a good thing for users to have access to data like this. Separate from its educational value, there is also a business angle to the Credit Report Card. Registered users can be matched with products and services for which they are most likely to qualify. In other words, if you register and you find that your credit is less than stellar, Credit.com won’t recommend a high-end platinum credit card that requires an excellent credit score You’d likely get rejected, and that’s no good for you or Credit.com. You’d be no closer to getting a product you need, there’d be a wasted inquiry on your credit report, and Credit.com wouldn’t get paid. These are essentially what are commonly referred to as "targeted ads" in the world of the Internet. Despite all of this, however, even if you never apply for any product, the Credit Report Card will remain free, and none of this will impact how the editorial team reports on credit and credit scores.

Your Stories

Lastly, much of what we do is informed by our own experiences as well as the experiences of our readers. We want to tell your stories if you’re interested in sharing them. Please email us at story ideas [at] credit [dot] com with ideas or visit us on Facebook or Twitter.

Thanks for stopping by.

- The Credit.com Editorial Team