- Personal Finance
Why Having Store Cards Isn't Such a Good Idea
Store cards are a tempting offer- after all, who hasn't been interested in getting discounts on their purchases just for taking out a card? In reality, store cards can quickly become a nightmare to use and are rarely as attractive as they may first appear. Here are some of the reasons why you should think twice before accepting a store card.
It's not uncommon for store cards to charge larger interest than some credit cards. Many store cards charge interest in the 20-30% bracket and some exceed this. Because of this, the interest charges quickly cancel out any "discounts" that you've been offered and you're not actually getting anything beneficial from using the card.
Low minimum payments
Not being charged much as a minimum payment might sound good but have you stopped to think about what it really means? Low minimum payments are used as a ploy to drag your debt out for as long as possible so that you'll owe more in interest. If you don't go beyond the minimum payments, you won't be clearing the debt any time soon. Even if you do manage to pay off your initial debt, you'll find that it keeps on increasing due to the interest that is being tacked on top. The bottom line? Pay off the balance as fully as you can each month and avoid sticking to the minimum payments.
Penalties for late payments
You can be hit with penalties if you don't make payments on time. For example, a store card that is advertised as being 0% interest can quickly revert to the standard APR (which could be anything from 20-30% or above) if you miss payments.
Damage to your credit score
Signing up for multiple store cards to take advantage of offers and discounts can do damage to your credit score. It's viewed in much the same way as applying for multiple credit cards in that they're deemed to be open lines of credit and too many of these can have a negative impact on your credit score.