You’ve probably heard it dozens of times – you’re going through the checkout at a large discount store retailer and the cashier offers you 10% off your order with their in-store credit card. For many people – especially if they’re making a large purchase – this offer seems quite convenient. Not only do you save money on your large order but you don’t have to pay it back right away but can it actually hurt you financially and damage your credit?

Many consumers have several store credit cards, one from each of their favorite retailers. The problem is, that these credit cards have several drawbacks. For one, most of in-store credit cards come with a significant fee (often times the initial fees are more than what you even save when opening the credit account). Additionally, they typically have very high-interest rates – usually 22% or higher – and what’s more most of these cards do not have an introductory rate or grace period, meaning they begin collecting interest the moment you swipe the card.

In some cases, these cards can be useful for certain large purchases for which you’ve already worked out a short-term repayment plan. When paying them off quickly, you can avoid heavy interest fees. However, most in-store credit cards tend to apply a very low minimum monthly payment – about 3% of the balance. As many cardholders tend to only pay the minimum, it can often take years to pay off while collecting interest the entire time. That $500 TV you bought on credit could end up costing you $2,000 or more depending on how quickly you pay off the card.

In-store Credit Cards Also Affect Your Credit Score

As discussed above, in-store credit cards tend to be a bad idea financially but they can also have a negative effect on your credit score. Each time that you apply for an in-store credit card, the store must then run your credit. If you’ve already had your credit run previously in the year (rental car, credit checks, car loan application, other credit card applications) each time you have your credit run, you can lose additional points off your score.

The in-store cards can also affect your credit score in several other ways as well:

• Credit History
• Number of Lines of Credit
• Late Payments

Since you likely won’t use the store credit card as often as other lines of credit, it’s much easier to forget about. This can lead to late payments, delinquencies or simply maintaining a maxed-out card for a long period of time which can also damage your credit.

If you already have several store credit cards, you may want to look into consolidating your debt or trying to pay them off as quickly as possible. Make sure that you’re making more than the minimum payments and set reminders for yourself to ensure that you make each payment on time each month.

For assistance rebuilding your credit score, call Credit Absolute for a free consultation at: (480) 478-4304