You’re at the register about to pay for a big purchase when the cashier asks if you want to sign up for their retail credit card. Stores ranging from Forever 21 to Barney’s all have store cards and it’s often hard to resist the temptation, especially when they are offering huge signup discounts. If you are making a big purchase, the savings can be extra inciting. However, is a one time discount worth the savings? Or can you potentially ruin your credit score? Is it smart to signup on impulse?
We asked the financial experts at NerdWallet if you should open up retail credit cards just to get the discount. The connected us with Olga, who explained, “Store credit cards may offer an initial discount upon signup, but they tend to come with high APR and are pretty restrictive–meaning you’re mainly only able to use them at that specific store.” The store credit card limits are lower than most other cards, so it’s easy to use a big percentage of your available credit during a routine shopping trip, which can bring your credit score down.
Olga added, “If it’s a store you frequent and they’re offering a really great deal, then it may be worth applying and holding onto the card.” One time discounts are usually not worth it, but some cards offer you a discount every time you shop. For example, the Target credit card gives you 5% off every purchase. If you do all your shopping at Target, this can equal major savings over time. Other stores offer exclusive coupons to card holders, which can be beneficial depending on how much you shop there. Just be sure to pay of the card right away to avoid extra fees. If you are going to carry the balance on the new card around for a couple of months, you’ll pay back any discount you got in the form of interest (read more here).
Never signup for a store card on impulse. Do your research before signing up for anything at the register. There are often better details available. NerdWallet suggests getting a regular credit card that offers rewards and a signup bonus instead. The next time you’re tempted to open a store credit card, remember: for benefits like cash back and 0% financing on purchases, it’s almost always a better deal to opt for a general credit card from a reputable issuer. So sorry, Forever21, we’re not signing up for your credit card any time soon.