Just Say 'No' to Opening That Store Card

"Would you like to save 10% today by opening a [insert store name here] credit card?" While it may be tempting to open up a card to save money, read through the pros and cons below before taking that new credit card plunge.

Pros

Saves you money right now

Opening up that card would save you 10% (which will vary) on your immediate purchase. If you're spending $100, that means you'll save $10. If you're buying a big ticket item or making a large purchase, the more you spend the more you'd save.

Potential future perks

Some store credit cards will provide for future deals as well. You sign up for a card and get points for every purchase, resulting in savings/freebies/coupons down the road. The more you spend, the more coupons and deals you will receive.

Cons

Spending More than the Purchase Price

If you don't pay off the charge right away, you could end up spending much more than the original item's price because of interest charges. Watch out for promotional rates as well. Initially, it might be 0%, but if you don't pay off the card in time, your interest rate may skyrocket.

Accruing debt

It can be tempting to use your new store card just because there's credit available. This is a bad thing when you are tempted to spend more than you actually have, whether it's for yourself or family and friends. Spending more than you have will no doubt get you into debt trouble.

Overspending

You might find yourself purchasing an item just because you can, not because you need it. Also, if you are motivated by deals and accruing points, this can be a slippery slope - causing you to spend even more than you originally might have without a store card. And a more important way to use your money is to build up your emergency fund.

Harming your credit

Opening up too many lines of credit and building up debt balances will negatively affect your credit score. If you miss or make a late payment, that will show up on your report and harm your score (not to mention the late fees). Plus, when you have a $500 limit and you charge $250, that also has a negative credit score effect. The closer you charge to your limits, the worse it is for your score.

Budget buster

If you charge something on that store card and don't pay it off in full, you'll find yourself with an added monthly payment. While sometimes it's not a big deal, for others with tight budgets this can be the breaking point. Or if you have an unexpected expense pop up, you'll be less likely to afford it without charging even more.

Instead of opening up a new card for a one-time purchase that could be a slippery slope to more debt, pay cash or use a non-store credit card with better perks and pay that off in full. As long as you can use a credit card wisely - charging and paying it off in full - then there's nothing wrong with taking advantage of the rewards options.

If you are stuck in a vicious cycle of trying to keep up on credit card payments, but feel like you're getting nowhere fast, LSS can help. Call us today for your free financial counseling session at 888.577.2227 or GET STARTED ONLINE. We will work with you so you can achieve your financial goals and eliminate your debt.

Author Elaina Johannessen is a Program Director with LSS Financial Counseling.