You should probably stay away from that store credit card
Rewards, especially in this state of consumerism, are awfully tempting.
We mean rewards as in, 10-to-20 per cent off a purchase-type incentives. The good kind.
One easy way to get those? Sign up for a store credit card, be it at Home Depot, Sears, The Bay or wherever.
Heck, why not? Not only are you making yourself eligible for a nice discount on your initial card purchases, but you’re only working your way to more store points if you shop often in one spot.
And, if you’ve got a bit of trouble with Visa or MasterCard, here you’ve got a friend. Store credit cards are often much easier to qualify for, no matter what your financial history.
So are there any downsides?
Consumer Reports has detailed why shoppers should stay away from store credit cards, and their reasons are tough to argue.
The obvious: store credit card interest rates can be ludicrously high, up to 24.5 per cent in some cases. Compare this to the average 12.81 per cent rate for normal cards, and you’re taking a much bigger gamble if you can’t come up with the cash at month’s end.
“If you miss a payment, any savings you get for opening a store card could quickly evaporate at such high interest rates,” Consumer Reports warns.
Your credit score can also take a hit if you open too many cards at once, which – once the intoxication of saving kicks in – you might be prone to do.
Most importantly, though, you might feel a kind of warped loyalty to the store you’ve signed up for a card from. Consumer Reports suggests a rewards program is likely to entice you to spend more than normal to take advantage of any discounts you’d get (all the while neglecting to shop around for the best price.)
“Before you sign up for any credit offer, you should read and understand all the terms and conditions of the account,” the site concludes, “Something you might not be inclined to do with a long line of shoppers waiting impatiently behind you.”
By Jason Buckland, MSN Money