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November 03, 2021

Are store credit cards worth the hassle?

The only thing worse than being hassled to sign up for a store credit card is when the person in front of you faces a similar proposition.

1316486_mock_credit_card_2 You’re thinking, No way does this moron, carrying 50 items no less, go through the motions while eight other customers wait in line. And no way does the store clerk let this happen.

Of course, it does, and much more often than you might think. Chances are, you might’ve even thought it a good idea to sign up for a store credit card once upon a time; there might be one in your wallet right now. But, are store credit cards worth it?

The immediate payoffs are great, sure. If you’ve got a big wad of stuff in your hand at the register, the promise of 10 or 15 per cent off your first purchase – what many retailers promise – is an enticing incentive.

And going forward, getting rewards for shopping isn’t bad either. The Canadian Tire Options MasterCard, for example, gives you Canadian Tire money cash back no matter where you shop, Canadian Tire or not. To a family of four or five, that can go a long way.

Yet what about the nasty back-end of store credit cards, which is discussed even less than the detriments of regular credit cards?

As Forbes.com pointed out today, signing up for a store-branded credit card is “generally not in your best interest,” due to interest rate penalties even higher than traditional bank CCs.

That Canadian Tire credit card, it should be noted, comes with an attached interest rate of 26 per cent, and that may be on the low end of things. The Sears Canada card charges 28.8 per cent annually, as does Canada’s Home Depot card, and on down the line.

Worse still, Forbes says that – contrary to popular belief – opening up store credit cards can actually hurt  your credit rating, not help it. Since the cards often have such low credit limits, the news site writes, opening up too many of them will reduce the average life of all your credit accounts.

Retailers have actually come under fire for their credit card promotions, too, which some contend are unethical.

“Store credit card issuers as a whole have taken flak … over the past couple of years because of the way they instantaneously approve consumers at the register, rather than truly evaluating their credit and the likelihood that they will be able to pay back their debt,” notes Forbes.

Now, none of these warning signs would be a problem if people just paid the balance off on their store credit cards in time, though that doesn’t really happen with any credit card too often, does it?

In your experience, are store credit cards worth the rewards they promise, or are the interest rates too high to handle?

By Jason Buckland, MSN Money



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Gordon PowersGordon Powers

A long-time fund company executive, Gordon Powers now heads up the Affinity Group, a financial services consulting firm. Gordon was a personal finance columnist for the Globe & Mail for many years, has taught retirement planning...

Jason BucklandJason Buckland

The modern-day MC Hammer of money, Jason can often be seen spending cash that isn’t his with the efficiency of a Wilt Chamberlain first date. After cutting his teeth as a reporter for the Toronto Sun, he joined the MSN Money team with...