Should You Open a Store Credit Card During the Holidays?

It's a move that might benefit you -- or backfire.

These days, I do most of my holiday shopping online. But a few years back, I decided to brave the mall and head into a popular retailer to buy clothing for a bunch of family members to give as gifts during the holidays.

When I was checking out, I was asked by the cashier if I wanted to open a store credit card. And my answer was an immediate "no."

But later on, I wondered if I'd made the right choice. While store credit cards have their pitfalls, opening one that day would've saved me a nice chunk of money on a very large purchase.

If you're doing a lot of holiday shopping in person this year, you, too, may be offered the opportunity to open a store credit card. The question is, should you say yes?

Why you may want to avoid store credit cards

Store credit cards are known to come with higher interest rates than your average credit card. If you pay your card off in full each month, that won't necessarily be an issue. But you never know when money might get tight and you won't be able to pay your bill in full. Do you really want to risk getting stuck with an exorbitant amount of interest on your purchase?

Another drawback of store credit cards is that you can only use them at the retailers that sponsor them (whereas you can use a regular credit card almost anywhere). Any time you apply for a new credit card, your credit score takes a small hit. But if you're trying to boost your credit, that hit is something you probably don't want. And if you're going to take that hit, it should probably be for a credit card that gives you more purchasing power -- not a card you can only use at one specific retailer.

Why store credit cards might be a good idea

When you open a store credit card, you're usually offered a one-time discount on your initial purchase. So, let's say you normally spend $50 each time you visit a specific store, only now, you're spending $250 in one fell swoop because you're buying holiday gifts. Scoring a 10% discount could shave $25 off of your tab, and that's a nice perk.

Also, store credit cards generally reward you with store cash you can redeem on future purchases. If there's a specific store you shop at a lot, that's a nice way to save some money.

What's the right call?

Store credit cards are a mixed bag. If you're tempted to open one this year, think about whether doing so will hinder other financial goals. If you're trying to buy a home, for example, you may not want even a minor hit to your credit score, as that could make it harder to get a mortgage.

Also, if you recently applied for a new credit card, you may want to wait a while before applying for another one. And so that's reason enough to say no to a store credit card.

Ultimately, you may decide the savings you're able to reap by opening a store credit card is reason enough to move forward. But before you do, make sure you know what terms you're signing up for. That's a good rule to employ any time you apply for a credit card in general -- not just a store-specific account.