4 reasons to say ‘no’ to a store card offer

Whenever I see someone sign up for a store credit card and say aloud, “Boy, I hope I’m approved,” I want to shout back, “Don’t do it! That 20 percent savings this one time isn’t worth it!”

Sorry for the outburst, but that’s how I feel. Here’s why:

Store credit cards are like most credit cards – you’ll pay interest if you don’t pay your monthly bill in full, you are penalized if your payment is late, and store cards count against your credit if you don’t manage them properly.

This doesn’t mean store cards are always a bad addition to your wallet, but if you have credit problems already and aren’t sure you will be approved for the card, then it’s probably not a good idea to add fuel to the fire.

I know that 10 or 20 percent in extra savings can be tempting, especially if you’re redecorating your house or doing some massive back-to-school shopping for your children. The fact that it’s an immediate sign-on bonus makes it almost irresistible. Who can say no when a store clerk asks, “Would you like to save 20 percent on your purchase today?” YES! Of course I do! Just not at the expense of my credit.

Here are some of the reasons you should avoid store credit cards if you have credit problems or card debt:

1. High interest rates: Compared to general purpose, use-anywhere credit cards, retail cards have very high interest rates, averaging 23 percent. General purpose cards average about 8 percentage points lower. If you don’t pay your bill on time, that 20 percent sign-up savings will be gone in no time.
2. Hard inquiries on your credit: Applying for a store credit card dings your credit score just like any other credit application. When you apply for a card, it generates a hard inquiry on your credit report.
3. Lower credit limits: Store credit cards usually have lower credit limits. That’s a good thing, right? Perhaps, but if you go on even a minor shopping spree with a card that has a low limit, your  credit utilization rate goes up, which also can hurt your score.
4. Store cards are easy to forget: Most of my credit cards are linked with my bank, so I see them every time I log on my banking portal. The cards I’ve rarely used since my 20 percent savings extravaganza are easier to lose track of – and that increases the chances I might miss a payment or let fraudulent charges go unnoticed for too long.

Store cards can be a smart choice for some people. If you’re trying to build credit as a student or new U.S. resident, store cards often are easier to qualify for than a regular credit card. And if you’re a credit card whiz and can juggle multiple cards without a problem, then make the most of that one-time 20 percent bonus on store purchases.

But if you’re not building your credit or you don’t have all sorts of apps to keep track of your cards, maybe it’s better if you don’t apply for a store card at the checkout lane. It’s probably best to rethink your momentary savings strategy. Cut some coupons, or wait for a sale. Don’t put yourself in the line of fire for a deal that seems too good to be true – because it usually is.