4 Reasons to Avoid Opening a Store Credit Card in 2019

by Elizabeth Aldrich | Jan. 24, 2019

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Young woman holding a credit card in her hand as she uses a laptop.

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It's easy to be fooled by enticing store credit card offers.

We've all been in the scenario: You line up to pay for your purchases and the store clerk informs you that you can save an additional 15% if you open a store credit card. Even better, you can take advantage of 0% financing for the next six months.

When you're buying items for a special occasion and plan on spending more than you would in a usual shopping trip, these offers become even more tempting. But often they end up costing you more than they save you. Keep an eye out for the following red flags that should make you pause and say, "No, thank you," the next time a clerk asks if you want to open a store credit card.

1. High interest rates

Store credit cards come with much higher interest rates than traditional bank credit cards, with some nearing 30%. In comparison, the average credit card interest rate is nearly half that. It won't matter if you have a good credit score, either, because store credit cards won't reward you for that with lower rates. Such a massive APR will leave you with interest adding up quickly each billing cycle. Even if you plan to pay off the balance in full each month, you run the risk of overspending or missing payments.

Instead, try: A low interest credit card. Some of these credit cards come with APRs as low as 11% for people with excellent credit scores. Even without a great credit history, it's likely you can still find a card with a lower interest rate than store credit cards.

2. Deferred interest

A store credit card with 0% financing might sound like a great deal, but there's no such thing as a free lunch. Hidden within the terms and conditions, you'll often find that the interest is deferred. This means that interest is accumulating during the promotional period; it just isn't being applied to your account. If you don't pay off the entire balance before the promotional period ends, (even if you leave a balance of $0.01), you'll be charged all the interest that's accrued.

Instead, try: A 0% financing offer that doesn't defer interest. The best 0% APR credit cards waive interest, meaning you'll only be charged the higher interest rate on the remaining balance once the promotional period ends. However, you should always plan to pay off the full balance before that time comes.

3. Your rewards aren't flexible

Store credit cards typically only earn rewards that can be used at that store or a sister company. You might be earning hundreds of points while doing your shopping, but if the only way to redeem them is to turn around and spend more money at the same store, how much are those points really worth?

Instead, try: A good travel rewards credit card or cash-back credit card -- either of which will earn you more flexible rewards that can be applied to travel purchases, redeemed for free flights and hotel stays, or redeemed for cash back.

4. Too many credit card applications can hurt your credit

With so many offers floating around, you may be thinking about applying for every store credit card that offers a discount with the plan to cancel each shortly after they are paid off. This may help you save money up front, but each credit card application has the potential to impact your credit score. Each time you apply for a new card, an inquiry is recorded on your credit report. Multiple applications within a short time period can indicate you are a riskier borrower, resulting in a lower credit score.

Instead, try: One really good cash-back credit card. You'll save money by earning cash back on purchases you were already planning to make. Choose one that matches your spending habits, and you could save hundreds of dollars every year.

On the surface, store credit card offers may look advantageous. However, there are some serious pitfalls that can cost you money and quickly outweigh any immediate savings. Avoid overspending and falling into unnecessary debt by planning your purchases and ignoring store credit card offers.

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