Avoid Store Credit Card Signups This Season

The holiday shopping season has officially arrived. During this time, consumers are faced with many financial decisions, such as how much to spend on gifts, which deals are the best deals, and how to pay for their purchases. Retailers know that most people want to get as much as possible while spending as little as they can out of their bank accounts, so they take every opportunity to try to sign you up for one of their store credit cards during your visit. The next time a sales clerk asks you if you want to sign up for the store credit card at checkout, here are some good reasons for you to say no.

Reason 1 – The Interest Rates Are Higher Than Average

The interest rates for store credit cards are generally higher than the interest rates for the all-purpose credit cards available through banks and credit card companies. A recent survey on CreditCards.com showed that the average interest rate for store credit cards is about 23.23 percent while the average for other credit cards is around 15 percent. If you tend to carry a balance on your credit cards, this additional amount could cost you hundreds of dollars in additional interest annually.

Reason 2 – The Rewards Often Aren’t Worth It

Salespeople try to entice customers into signing up for the store credit cards by touting the rewards and perks available for using the credit card, such as a percentage off of purchases or cash back. It is important to remember that these companies are not in the business of losing money and they are counting on you paying much more in interest and fees than you receive back in rewards. The spending needed to reach a decent reward level can be considerable and redeeming the rewards can be complicated. In many cases, you would do better financially waiting for sales and closeouts on the merchandise you want than signing up for the store credit card and redeeming the rewards.

Reason 3 – Your Credit Score Will Drop

Many people do not know that every time they sign up for a credit card, a loan, or other credit product, it causes a drop in their credit score. That is because each application is treated as a credit inquiry, which deducts a few points off of your score each time. The resulting drop in your credit score could be enough to shift you from the “excellent” credit range to the “good” credit range, causing you to pay higher interest rates for any credit products you apply for. Applying for a handful of store credit cards within a short period of time can also be a red flag in the eyes of a lender because it makes you appear desperate to borrow money.