Shopping holidays are as American as apple pie and with so many delicious deals these days, it’s no wonder.
But American consumers are increasingly looking back at their time in the stores and wishing they’d never did one thing. Yes, we’re talking about applying for store credit cards!
Store-branded credit cards have become a big part of the American shopping experience as retailers have partnered with banks to make borrowing (and spending) easier.
The thing is, store credit cards come with great responsibilities and some pretty harsh conditions.
Shoppers cite this as their #1 credit regret
Credit commodore Clark Howard says broadsiding unsuspecting shoppers into applying for store credit cards is a successful ploy done by many major retailers. Here’s how it typically unfolds:
“You get to checkout, and the cashier says, ‘Would you like to save 15% on your purchase today?” Clark says.
Despite the temptation, Clark adds what you should say is this: “‘No, no thank you. I don’t want to save the money.’ Why? Because what they want you to do is get the store credit card.”
Retail cards cause a hard inquiry on your credit report, a ding which could take up to two years to recover from. The more hard inquiries that hit your credit, the lower it will go.
So think about it: You go to the store to buy a tie, you leave with your credit taking a major hit.
That’s why a recent LendingTree study found that nearly half (47%) of Americans who had store credit cards regretted getting them. And the most likely segment to regret store credit cards are parents with children under age 18, the survey found.
Another drawback: Clark says, “if you’re not able to pay it off in full, you get eaten alive [with the interest rate.]”
But there are instances when store credit cards may come in handy. With that in mind, here’s the benefit and the cons to having one:
Store credit cards: The good, bad and ugly
- Good: Some store credit cards offer real incentives like cash back or 5% discounts, but they are far and few between. Clark says there are better options though that offer sweeter deals without the drawbacks.
- Bad: Store credit cards often come with enormously high interest rates. The average is about 25%, according to the LendingTree study.
- Ugly: Another card, another security risk: Let’s face it, it’s hard enough keeping your major credit cards secure. When you open a handful of other store credit cards, you increase the likelihood of identity theft by spreading your chances of a data breach out to each respective store and their parent companies.