Before you walk the malls, take to the streets or hop on the Internet this holiday season, you’ll want to make sure you know where your credit card is. The best place is out of sight, out of mind.
If we’re going to be honest, however, we all know how difficult shopping without a credit card can be – especially during the holidays. And all those offers to save 10 percent on your purchase “today” by applying for a store credit card sound too good to pass up. So why should we?
Before you go on a shopping spree opening a slew of store credit card accounts, take a moment to ask if it’s in your best long-term financial interest.
How many credit cards do you have already? Do you carry a balance on any? How many do you actually use? What’s the percentage rate on each one? And what’s the harm in having several credit cards – especially if you don’t use them?
Store credit cards do offer perks. Although the days of zero interest and no payments for six months are history, many stores continue to offer specials featuring zero interest so long as you make regular payments. Miss a payment, however, and you’re liable for interest – as high as 24 percent -- from the purchase date.
If used wisely – i.e. pay off the balance each and every month – having a store credit card can be a good thing. Many offer discounts on purchases (Ann Taylor, for example, offers a 5 percent discount on purchases made with the store card) and others offer purchase points that can be applied toward later discounts.
But opening too many store credit accounts can be detrimental to your credit score. And a dicey credit score could mean not getting the house of your dreams –or any other big-ticket item – at the best interest rate.
How does this all work? Lenders routinely pull all three of your credit reports and credit scores. It’s the middle score that determines if you get great credit rates, unattractive rates, or if you’re declined.
So the question of the day remains, is it really worth saving $10 on a $100 purchase if it’s going to impact your ability to move into that new house you have your eye on?
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Luanne Kadlub, BBB media relations manager, 970-488-2044 lkadlub@wynco.bbb.org