If you shop at most major department stores, chances are you’ve been offered an in-store credit card application at the checkout line. While these cards are tempting, there are a number of pitfalls connected to them that can cause you to rack up quite a debt before you know it. Shop smart and know the drawbacks of these in-store credit cards before you apply.
High Interest
Most department store credit cards charge extremely high interest rates. Depending on the store, some charge up to thirty percent interest, which makes it almost impossible to pay off the premium.
Eventually, you’re stuck in a vicious circle of paying the interest while the balance never drops. Shop around for a card that offers a lower interest rate and shop at the store when there’s a sale, instead.
Costly Late Fees
Some department store cards charge anywhere from thirty dollars up to double your original payment if you make your payment late.
This can cause you to fall so far behind that the debt could start to negatively affect your credit. Instead, apply for a card that has reasonable late fees and always pay your credit card promptly, at least a week before the due date.
They Can Affect Your Credit Rating
Many department stores don’t run credit checks before they offer you a card. This enables you to shop when you’re bored and make unnecessary purchases that you can’t afford to pay off at the end of the month.
When you fail to make the payments, it gets reported to credit agencies and your credit score will plummet. If you already have bad credit and a number of outstanding debts, your score will be extremely difficult to fix.
A Limited Shopping Experience
In-store credit cards can offer great deals, but in some cases, the product on sale or that must be purchased with your credit might be cheaper elsewhere.
Not all stores are willing to meet other store’s prices, especially when it’s a deal that’s attached to their credit card. Always shop around for the best deal before you make a charge.
They Increase the Urge to Impulse Buy
Impulse purchases are the quickest way to run up a huge debt on an in-store card. After all, what’s easier than tossing some stuff into the cart at the last minute while you’re at the store for one small thing?
Impulse purchases charged onto a store card also raise the total bill for the next month’s payment, which may come as a surprise for both you and your budget.
They Brand You as a Credit Risk
Having too many in-store credit cards can seriously impact your ability to take out other, more important loans, such as to buy a car or a home.
When lenders look at your credit history and see that you’ve opened multiple lines of credit, it makes you look irresponsible.
Not only that, but if the history is negative and rife with late payments, the chances of you being able to get a car or home loan drop to nearly zero.
They Increase Holiday Overspending
Having an in-store credit card can tempt you to spend way beyond your means at Christmas and other holidays.
You can charge that expensive toy now, but will you be able to pay off the balance along with the rest of your bills at the end of December?
By avoiding the temptation of in-store charges, you can shop within your means and keep your budget manageable.