You hear it from store clerks more than “Have a nice day.”
Just apply for our store credit card, they say, and save 10 percent off your purchase today.
Who doesn’t like a discount?
Americans love their plastic.
There are 383 million open credit card accounts in the US, according the Federal Reserve Bank of New York. Total credit card debt stands at about $850 billion – with a B. The average credit card borrower owes $4,965, according to TransUnion, the company that tallies your credit score.
And still retailers think everyone needs another credit card.
Why? Well, to get you to shop at their store, to start. If you have a credit card you can use only at Macy’s, where are you going to go Christmas shopping?
Also, the interest rates are typically pretty steep. The interest on purchases charged to your Walmart credit card is 22.90 percent.
Store credit cards do offer some perks. The Walmart card, for example, gets you 5¢ per gallon at participating Walmart gas stations. Other cards offer reward points.
The REDcard offered by Target gets you a 5 percent discount on every purchase – a perk that gives even professional cheapskate Clark Howard pause. Assuming, of course, you pay off your balance to avoid the 22.90 percent interest charges.
Store cards typically have more forgiving credit standards than major credit cards such as Visa or Discover. That makes them an option for someone trying to build – or rehabilitate – a credit history.
Applying for store credit cards will ding your credit score – just the inquiry to the credit bureaus counts against you. The more cards you have – the greater your potential liabilities – the greater credit risk you are considered. So that discount at the checkout could make it harder to get a mortgage or automobile loans.
If you are a disciplined spender – a big if for many folks – a store card that offers continuing discounts such the REDcard might be a smart move. And those looking to build a credit history can benefit from responsible use of a single store credit card.
Otherwise, smile and tell the sales clerk, “No, thanks.”