12.05.2011 / Is a Retail Store Credit Card Right for You?
This holiday shopping season you may be tempted to buy into special offers and discounts that come along with opening retail store credit cards. However is this a good idea for you?
"Do not be tempted to buy products you can not afford"
These high-interest rate, in-store credit cards are typically not affiliated with major credit card companies and will not offer the flexibility that other credit cards can. If you are making a large purchase, that 10% discount could make a large, immediate price difference. But if you end up carrying a balance for even one month, the savings can be wiped out instantly. Keep the following factors in mind as you are shopping this year:
• Avoid an Impulsive Application: While it’s tempting to answer “yes” and apply at the register for the instant discount, you should first step back and consider. Sales associates typically receive incentives for convincing customers to open up a new credit account so they will do their best to convince you it is a great offer. While there may be an initial teaser rate or a percentage off discount associated with applying, you should still take some time to think about it instead of instantly applying. Ask if you can place your items on hold to take some time to consider or ask if you can think about it and come back, apply for the card and still receive the discount on your purchase. Remember, both applying and opening a new credit card account will lower your credit score. If you are planning to apply for a loan in the foreseeable future, such as a home loan or auto loan, you should avoid opening a new credit account.
• Consider Alternatives to the Benefits: How often do you shop at the store? If you are not a frequent shopper and are only shopping for gifts, it probably isn’t a wise decision to apply for the credit card. Are there other ways to receive store discounts? Does the card offer other benefits besides discounts? Mailing and email lists also provide comparable – or sometimes better –offers such a discounts, free shipping, gift-wrapping and referral programs. Ask the sales associate for details on additional ways to save.
• Compare Your Current Credit Card: Store credit cards are typically not associated with major credit card companies such as Visa, MasterCard, Discover or American Express. This is an important factor to consider because you will not be able to use the card at other stores. Consider the benefits your current credit card offers including interest rate, rewards and flexibility. Or look at the possibility of opening a new credit card. First National Bank offers a variety of credit cards to meet the unique needs of your lifestyle. You can also opt to use your bank check card to have your purchase automatically deducted from your checking account to avoid any finance charges and impact to your credit score.
• Pay off Balance in Full Monthly: Do not be tempted to buy products you can’t afford. If having an in-store credit card will encourage you to overspend, don’t apply. If you do open a credit account, be sure to pay off your balance in full monthly to avoid high interest finance charges. Visit firstnational.com to use the “How important is the interest rate?” calculator and discover the impact a high interest rate can have on your finances.
While opening an in-store credit card can provide you with immediate savings, it may not pay off in the long run. By taking time to consider these options, you can make an educated and financially smart decision.