Department store credit cards have some of the highest rates in the credit industry and you must be wary of their tactics to get you to sign-up. Store credit cards are the beginning of financial disaster for millions of consumers that get sucked in by what are seemingly amazing offers to save money on purchases.
Here’s how department and retail stores suck you in to sign up for their credit cards.
It starts at the checkout stand, you are placing your merchandise on the counter for the sales clerk to process your sale and then they ask:
“Would you like to save 25% of your purchase today?”
This is a loaded question; of course you would like to save 25% off your purchase, who wouldn’t want that?
Your reply is, “Yes, I certainly would like 25% off my purchase.”
The clerk then shows you the store credit card application form and says, “If you apply for the store credit card, you get 25% off this purchase right now.”
You apply to take advantage of this seemingly amazing offer. But be ware this could be the moment your credit takes a nose dive.
First of all, every time you apply for credit, it has an impact on your credit score. If you have been thinking about a mortgage loan or possible a low interest balance transfer credit card from a regular card issuer, your application for the store card could impact your ability to acquire other credit.
The next time a sale clerk tries to get you to apply, politely decline. Your credit score will be impacted by an offer such as this. And, if you do apply for the card and you have a tendency to carry a balance, then you will be paying exorbitantly higher interest rates costing you a lot more money than the 25% you saved on the merchandise when you applied for the card. Department and retail stores know that there is serious money to be made by providing credit to consumers so be very wary of these one time offers, they are not as good as they look.
Tips for Maintaining a Good Credit Score
To maintain a good credit score it is wise to have one credit card account and avoid applying for several cards. If you have a single long standing account that you pay on time you are much better off than having multiple credit cards.
A very common misconception many consumers have is that if they continually open new accounts that this will help build their credit rating faster.
In fact, if you continually open new accounts it will have an adverse impact on your credit score.
The reason being that you could max out all your cards thus putting you in the category of a risky potential customer for a lending institution, if you are in the situation of having multiple credit card accounts then you must take action and close some of your accounts, in fact I recommend closing all but one account.
The credit card account you should keep open is the card you have held for the longest period of time because that plays a role in determining your FICO score.
If you carry a balance on several cards and are considering my advice of closing out all but one of your accounts, the best thing for you to do is call the card issuer where you have held an account for the longest period of time and ask if you can get an introductory interest free period and transfer existing balances to that card.
In most cases the credit card company will accommodate your request.
To maintain a good credit score you should next start paying down your revolving credit line because a high balance also impacts your credit score.
To summarize, your plan of attack for maintaining good credit should be like this:
1. Avoid applying for new offers, particularly department or retail store cards.
2. Consolidate existing credit card balances onto one credit card. Ask your bank for a 0% introductory rate on balance transfers.
3. Start paying higher payments onto your consolidated credit card by taking advantage of the 0% APR offer. Since you have been paying your cards with interest included, a 0% APR introductory period gives you the opportunity to pay down the balance on the card.
So remember these words of wisdom the next time a sales clerk asks if you would like to save 25% off today and you will avoid the pitfall that millions of consumers fall for every day.
