It’s probably happened to you. You go to check out at a department store or other retailer, and they tempt you with a discount—if you open a store credit card, you'll receive 30 percent off your purchase, or some other percentage.
One-Time Discount
Some stores offer a percentage off your purchase. Or they could provide a flat-rate discount off a minimum purchase amount. And although some stores let you have that discount for the entire day you opened the account, it’s still a one-time discount.Opening Store Credit Cards Affect Your Credit Score
When you apply for a credit card, the store makes a hard inquiry into your credit. If you do this once, your credit score may be OK.But if you apply at various stores to take advantage of discounts, you'll probably see a couple of points dip in your score.
And regardless of whether your store card is approved or not, you'll have that hard credit inquiry on your score.
If you open a new credit line, you'll change the landscape of your credit profile. The new card will lower your account’s average age. That means the amount of time you’ve had a credit card or loan. To lenders, this could make you look like an inexperienced borrower.
Lower Credit Limits
Store credit cards typically have lower limits than bank or credit union cards. That may not seem important to you, but these low limits could affect your credit score.Deferred Interest
A payment plan offer with no interest gives you months to pay off a big purchase like furniture or appliances. That store’s credit card looks good.But check the fine print. Most of these have a deadline as to when you should have the item fully paid for. If you haven’t paid the purchase off before the deadline, you’ll have to start paying interest. Or even worse, you might have deferred interest, in which case you won’t have saved anything.
Inflated Optimism to Pay Off Card
You may open store credit cards to take advantage of the savings. You’re optimistic that you’ll manage the card when returning home. After all, saving 30 percent is a great deal. But when all the bills come in, you may forget the plan.Temptation to Spend More
Stores know that credit burns a hole in people’s pockets. Store credit cards increase your temptation to spend more than you would normally. This is especially true when saving money the day you open the account.Store Cards Have Expensive Terms
Store credit cards are notorious for having high interest rates. Some interest rates are higher than 30 percent. In 2024, the average rate for a bank credit card is 24.43 percent. And the average rate for a credit union is 12.86 percent.Limited Rewards
Retailers, with some exceptions, typically only offer significant rewards on store purchases the day you open the account. You don’t receive much after that.Some stores, such as Lowes, will give you 5 percent off all purchases when you use their store credit cards. But even if you’re spending hundreds of dollars a month, it still doesn’t equate to much. And remember that even if the MyLowe’s Reward card gives you 5 percent, you’ll be paying 31.99 percent in interest. If you carry a balance, you’ve eliminated the benefits of the 5 percent.
