Why that department store credit card is killing your credit

We’ve all been in that situation, the one where the department store credit card becomes too irresistible to ignore.

You know that moment, when you’re in the midst of pushing around a full cart, which wasn’t your plan at the moment, or carrying around enough clothes to fill more than just one closet or how about that trip to Target that led to a complete overhaul of your living room with new end tables, blinds, drapes and TV stand.

In that instance, you simply can’t say no when that cashier or sales representative asks you if you want to open up that store credit card to save a certain percentage off today’s purchase. You gladly take that 10 or 20 percent discount in exchange for opening up a new card. In your mind, you’ve scored the better end of the bargain; you get all the items you wanted for less.

While that thinking isn’t untrue, what happens after that card is opened and used tells the true story if the decision ultimately is one that benefits your financial future.

Credit cards given out by stores aren’t quite as difficult to secure versus the traditional Visa or MasterCard, but that said they come with equal parts benefits and drawbacks as their counterparts.

Naturally, you save money when you open the card and in some instances every time you use it. That incentive only really stands as a positive if you’re paying off that balance on the first try, when that bill first comes in the mail. Those cards have tremendous upside on personal interest rates initially, but once that period come to a close, rates can balloon up to 20 to 30 percent.

Simply put, if you’re not using the store card and then paying them off to to avoid high rates yet still get the benefits of the special deal, then you’re not using them correctly. Those cards need closed quickly, particularly if you’re not using them as well. Having them sit isn’t going to do you any favors both from a temptation standpoint but also your credit as a whole.

As inviting as those retail cards can be, and despite all the rewards (which incidentally only mean something when you actually use them), you have to be selective with the ones you open and use. Furthermore, you absolutely must pay them off right away or before you start to incur interest charges. Those extra charges are going to mean your payment goes up and hopes dashed of ever saving money while still paying your credit card bill on time.