DebtGoal has a great post on why to skip the store credit cards. I have a confession to make, my first job in high school was at Target and I was one of the top (the top part time) in the store for selling Target credit cards. Since I can do simple math, I just told people what the 10% they could save would be for large purchases. People would almost always take the savings on large purchases. If you could save $100, I bet you would say yes.
However, we have to remember the reasons not to take the card. The one I have been tempted by most is Kohl's, as they generally have fair prices and sell what I wear to work. Their card holders are constantly sent coupons and are given discounts. I shop there enough that I have considered the card, but I have held out this far.
DebtGoal outlines these reasons to skip the cards. I have added my own commentary.
1. Fat Wallet – Simplicity is important in finance. I am a big advocate of automated and simple personal finance, and one less card just makes life easier.
2. Offers are a One Time Deal – At Target you save 10% one time. The reason I like the Kohl's card is you save much more often. A one time deal is a good tool to pull you in, but is a short lived reward.
3. You are Encouraged to Spend More – Fairly self explanatory. If you can spend, you might do it.
4. Lower Credit Score – New credit lowers your credit score. It takes a while for that new credit to be “incorporated” into your credit report and for your score to go back up.
5. High Interest Rate – Again fairly self explanatory. Most store cards have rates well over 20%. That is a lot of interest.
6. Bad Terms – Most store cards have questionable terms at best. Congress has made a formal inquiry into store credit practices. The marketing is dirty. The interest rates are high. They are just not good for consumers.
For another take, visit DebtGoal.com. Now it is your turn. Do you have any store cards? How have they been for you?