Financial Feud

Financial Feud: Store credit vs. Credit score

Louis Barajas - Small business and personal finance expert Jul 1, 2013

Dear Hamad — You are right to avoid opening up credit cards at department stores in order to save on one-time discounts. While the savings may be enticing, the stores have ulterior motives. They make it all too easy for customers to continue using their cards after those initial purchases.


That said, I’d forget about the mistake that was made, those mistakes can be fixed.  Ultimately, it’s how these cards affect your potential overall debt and credit score that you should be more concerned about.


Here are some problems that I see.  Major department stores carry much higher interest rates (around 23.83 percent) than the national average for regular credit cards (14.78 percent). Also, you never want to open a store card with the intention of closing it right away. This ultimately hurts your credit and lowers your total FICO score.


Trust me; I have been at the cash register many times with my wife when they have tried to entice us with a 10 or 15 percent discount on a large purchase. The process sounds too easy, and it is — all they ask is that you give them your social security number and show them your driver’s license to open up a card (no application required). But if you are disciplined and knowledgeable about the credit game, you can easily tell the store clerk – NO, THANK YOU!

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