Sally Herigstad is a certified public accountant and the author of "Help! I Can't Pay My Bills: Surviving a Financial Crisis" (St. Martin's Press, 2006). She writes "To Her Credit," a weekly reader Q&A column about issues involving women, credit and debt, for CreditCards.com, and also writes regularly for MSN Money, Interest.com and Bankrate.com, and has guested on Martha Steward Radio and other programs. See her website SallyHerigstad.com for more personal finance tips and free budgeting worksheets. Ask Sally a question, or read her previous answers in the To Her Credit archive
Dear To Her Credit,
Just about every store I go to, when I'm checking out they ask if I want to open an instant credit card account. They usually offer a 10 percent to 15 percent discount on my purchase. If I'm buying a couple hundred dollars' worth, that could save me $20 or $30!
Is there any harm in opening store cards to get the one-time discount, especially if I never use them again? -- Jessica
Those discounts are so tempting! I almost always pass them up, however. There are too many reasons why I don't want a credit card for every store in the mall:
It's too easy to spend money when you have more cards. Kimberly Penney of Kent, Wash., never gets the store card. She says, "I don't want to be tempted to use it later on, so I just don't open it."
Store credit cards typically have the worst interest rates. Why pay an of 22 percent or more when you can choose from a number of bank cards that charge half as much interest? And, as I discovered, store card companies are less likely to respond when you ask for a lower rate after you've proven to be a good customer.
Opening a new credit card can ding your credit score rating. If you're not expecting to refinance your house or borrow money in the near future, that may not be big deal. But if opening a new account causes a 10-point drop right before you apply for a loan, it can cost you plenty. Andy Jolls, CEO of Videocreditscore.com, a credit scoring educational site, gives the example of saving $45 on your current purchase -- only to pay about that much more every month on your new home loan because you didn't qualify for the lowest interest rate. In a worst-case scenario, you could pay $15,480 more over the life of your loan just to save $45 dollars at the checkout counter. It's hard to think of a worse deal than that!
It's one more card to keep track of and have open. An open card, especially one opened with another person, can come back to haunt you years later. You should never have more cards open than you can easily remember and keep track of.
"It's one more card to worry about identity theft on," says Jolls. If anyone ever steals or forges your driver's license, for instance, they can go to the store, present ID, and use your account.
You'll get a more junk mail -- possibly even junk e-mail -- once you're a "preferred" customer. That's just more temptation. I know from experience the more ads I look at, the more I'm likely to find something I want. If I don't see it, I don't buy it.
Some stores now offer a discount not only on your current purchase, but on everything in the store for the next day or two. Great -- all I need is pressure to buy more right now!
Have you ever wondered why stores are so anxious to sign you up for a card? They know from experience that once you have their card, you are much more likely to shop there and to spend more money when you do!
Jolls' rule: "Stay away from these store cards."
There's an exception to every rule, however. I was buying draperies at JCPenney a few years ago, and they offered a 15 percent discount if I opened a card. Getting a 15 percent off on a purchase that size was too good to pass up, so I took it. I paid the balance off immediately, and I don't keep the card in my wallet. Getting one store card didn't hurt anything.
Most of the time, however, it's better to just smile and say "no." Happy shopping!
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