4 in 10 shoppers might open a store credit card during the holidays. Should you?

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It’s a decision that may serve you well – or that you may regret.


Key points

  • Store credit cards usually offer in-store discounts and rewards.
  • They also tend to charge a lot of interest which is a bad thing when paying off a balance.
  • Read the fine print on an in-store credit card offer before you jump in and sign up.

The holiday season is a popular time to shop. And this year, you might be eager to start shopping early, especially as a number of retailers are running pre-holiday promotions.

However, during your purchases, you may be asked if you wish to open a store credit card. Contrary to normal credit cardstore credit cards can only be used at retailers that issue them.

In a recent Bluedot survey of holiday shopping, 40% of respondents said they could open a store credit card this season. But is it a smart move for you?

The advantage of store credit cards

With a store credit card, you could be approved within minutes of submitting an application. It is convenient.

Plus, you can often get a nice discount on your original purchase when you open this type of card. Some offers, for example, can reach 25% or 30% off your first purchase. So if you buy a $200 holiday gift and get 30% off, that’s a nice $60 savings.

Plus, store credit cards often make it easy to earn rewards points that you can redeem for in-store purchases or cash back on those purchases. So if there’s a retailer you shop at a lot, then a store credit card might make sense.

The downside of store credit cards

Store credit cards can have their advantages. But one downside is that they tend to charge higher than average interest rates on carried over balances.

To be clear, that’s a pretty big downside. Many people rack up higher credit card tabs while on vacation. But if you run up a balance on a store credit card that you can’t pay off right away, it could end up costing you a lot more than you expected — so much more than you’re canceling out the cash back you got on your original purchase.

And remember, if your credit card balance gets too high and you fall behind, you risk damaging your credit score. This could make it more difficult to borrow money in general.

Also, every time you apply for a credit card (store or otherwise), you have a difficult investigation done on your credit report. Granted, a single serious inquiry isn’t a big deal if your credit score is strong. But if you’ve recently applied for other credit cards, further investigation could have a much bigger impact on your credit score. And that’s a bad thing if you’re planning on asking for a bigger short-term loan, like a mortgage.

What’s the right call?

You might be tempted to open a store credit card while on vacation, and in some cases that might make sense. But before you go down that road, absolutely make sure you read the fine print. In addition to ending up with a higher interest rate, you may find that the benefits offered by your card are limited beyond your initial discount. And if so, it might make a lot more sense to apply for a new credit card that offers a generous sign-up bonus and rewards program at all levels.

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