Reason to just say “no” to store credit cards

Tuesday, January 4th, 2011

At least $13 billion in retail sales annually are on account of the store credit cards. These cards are usually offered with a 20% or 30% discount on the day’s purchases and there would be empty promises of discounts on future purchases as well. Some store cards also offer 0% APR for a certain period of time on all purchases. But usually these offers are not worth it and it would be best to refuse the store credit card straight away as these so-called benefits are not worth having another card in the wallet. Even in case of the credit score, opening another credit card account is not good as it affects the credit score. A store card is a bad idea for a variety of reasons such as:

• Firstly, there may be a promise of a decent discount but that may be applicable only on a select few items and that too it might be applicable on purchases made up to a specific amount. There might be many parameters for availing the discount and anything outside that would not fetch any discount at all. For instance, discounts might be available on certain brands only and that too under a certain band price. Discounts might also be available only on purchases made up to a particular amount for instance on transactions up to maybe $500. Sometimes, there may be a minimum amount charged maybe during the first six months on purchases of $1,000.

• The interest rates on the store credit cards are exceptionally high and one needs to consider this as the APR’s are very high. For instance, a Chase Amazon Visa Card has a very high APR starting at around 18.99%. It can go up to about 29.99% or it could be the same as the default rates on many other standard credit cards.

• One has to be very cautious in reading the fine print with regard to the introductory period. Even in case there is a promise of 0% APR the introductory period might be very little like three months or so. Alternatively there could be many clauses that come with the introductory period offers and in case the balance is not paid in full towards the end of that period, then most of these retailers can rightfully charge interest on the total balance and not just on the current balance alone, which means on the total amount inclusive of the introductory period.

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