Should I Avoid Store Credit Cards During The Holidays?

November 21, 2015, Written By Lynn Oldshue
Smiling young blond woman with shopping bags and payment card

As you begin your holiday shopping, you will undoubtedly be asked to apply for a number of store credit cards. You could accept these offers and the discounts that accompany them, but doing so may not be the best decision for your long-term finances. Should you avoid store credit cards during the holidays?

The Benefits of Using Store Credit Cards

Store credit cards are designed to provide special discounts at the places you shop. The more money you spend at the store, the more points you earn and the more money you save. You may be able to get a sizable discount on your Christmas items by shopping with a store card. The amount of money you save will depend on the type of card you use and how much money you spend.

Store credit cards also give you a chance to buy items when you don’t have the money readily available. For instance, if you want to surprise your spouse with a flat screen TV, you could put that charge on a store credit card and pay it off in the coming months.

Reasons to Avoid Using Store Credit Cards

Even though store credit cards offer rewards and discounts, they are known for having high fees and interest rates. The 10% you save on your initial purchase may cost you a lot more in interest if you can’t pay off your balance.

Store credit cards also act as a temptation you may not be prepared to handle. It’s easy to spend more when you do not have to hand over cash for the item. That may not make sense for your long-term financial goals.

Every time you open a new credit card account, there will be a mark on your credit report. Too many marks can adversely affect your credit score. The stores are the ones benefiting from you opening up a store credit card account. They know they can earn back all of the money you save in interest and extra purchases. In addition, you are now part of their mailing list, so you can expect to be flooded with frequent emails from this company.

How to Use Store Credit Cards While Avoiding the Pitfalls

If you want to get the savings without the high interest in the future, here are a few safe ways to use store credit cards during the holidays:

  • Only use a store card for an item for which you already have the cash. Then, pay off the balance immediately to avoid interest.
  • Read the terms of the card carefully before signing up so you do not lock into any kind of annual fee. You may also want to look at how the rewards system works as some will only issue rewards for full-priced items.
  • Do some price comparisons before signing up for a new card to see if any other store already has prices lower than the discounted rate with the card.
  • Only sign up for cards for stores where you regularly shop. In this way, you are more inclined to pay off your balance and continue building rewards after the holidays.

If you are considering opening a store credit card account due to the initial discount, make sure that discount outweighs these pitfalls. Assess each credit card offer that comes your way, and only apply for the ones that will work best for you.

The information contained within this article was accurate as of November 21, 2015. For up-to-date
information on any of the terms, cards or offers mentioned above, visit the issuer's website.