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How In-store Credit Cards Can Hurt You Financially

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?

For many consumers, they have several store credit cards, one from each of their favorite retailers. The problem is, these credit cards have several draw backs. For one, most of the 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 is 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 of 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 card holders tend to only pay the minimum, it can often takes 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

How In-store Credit Cards are BadAs discussed above, the 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

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Kade Deeyor
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17:56 13 Feb 20
Credit absolute has helped me tremendously over the past few months. My scores for all 3 credit bureaus have increased by 50+ points. I appreciate the education on credit. I am now much more knowledgeable and strategic about when I should and should not use my credit cards. I look forward to my progress as my goal is to purchase a home by the end of the year!
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Doug Donaldson
06:13 21 Dec 19
I noticed a few changes on my credit report that had lowered my score which concerned me and after looking at reviews online I decided to set an appointment with Derek at Credit Absolute. I was fully expecting to spend hundreds of dollars for his advice on what I should do to get it back up to where I had it. After consulting with him and looking in depth at my report, he gave me some tips and helped me understand how the 3 bureaus work and what I could do to increase my score. Best of all..... he didn't charge me a penny. Derek is an honest guy, running an honest business, and if you are looking to build your credit score then he is the guy to turn to. It was about a year ago that I met with him and my score is up over 90 points. 10/10 would recommend Derek at Credit Absolute!
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21:58 25 Nov 19
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21:29 13 Nov 19
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02:07 01 Nov 19
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Christopher Moore
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15:10 03 Oct 19
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19:02 20 Aug 19
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Zacary Roberts
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20:15 19 Jul 16
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