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Impulse shopping: Store cards

By Janna Herron · Bankrate.com
Tuesday, February 11, 2014
Posted: 3 pm ET

One in five Americans opened a store credit card for the discount in the last two years and nearly half didn't consider the credit or financial ramifications of doing so, according to a new survey from CreditKarma.com.

The survey released on Monday also found that the percentage of shoppers who opened a store card was highest in November at 13 percent followed by December at 11 percent. January was the month with the lowest percentage at 5 percent.

The online survey polled 2,051 adults in January.

While opening a store credit card isn't necessarily bad, it can affect your credit and finances. The store will pull your credit to approve your application and that "hard inquiry" will ding your credit score and will remain on your credit report for two years.

Store cards typically come with low credit limits of between $200 and $300, so it's easy to use up a lot of your limit. That affects your utilization rate, or the percentage of the available credit that you use, which is also a key factor in calculating your credit score. The rule of thumb is to keep the percentage below 20 percent.

So, if you open a store credit card with a $500 limit and put $250 in purchases on it, your utilization rate for that card is 50 percent, which won't help to boost your credit score.

Store credit cards also come with high interest rates, regularly in the 20s. That means if you don't pay off your entire balance, the interest charges will rack up quickly. Roll over the balance long enough and any discount you got at the register for opening the card -- such as 15 percent -- will disappear.

This doesn't mean you should never open a store credit card. If you consistently pay your other credit card bills on time and in full, you won't have a hard time managing a store card. Retailers also offer special promotions and discounts through the year for their store cardholders. So, if you shop at the store regularly, those specials may help you save money.

Have you opened a store card recently? Which one?

Follow me on Twitter: @JannaHerron.

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5 Comments
Sparky
February 26, 2014 at 11:25 pm

Home Depot offers 0% interest for any purchase over $200. It seems like it's a constant offer but may actually come and go.

If your current credit limit is too low to purchase what you want, they just about always increase it so you can make the purchase. Best of all is that higher credit limit stays, bettering your overall credit score as your use % drops.

We recently had a cabinet resurfacing for $7k and they increased our credit limit to $8k and will pay it off before the 2 year no interest period ends! :)

Linds B
February 26, 2014 at 11:06 pm

I have one store credit card. The interest rate is awful and the limit isn't large, but none of that matters to me. I opened this store credit card because of the special discounts and what not that are offered to card holders (such as earning points for each dollar spent and once you have enough points they send you a gift card) as well as the fact that I do not have to worry about paying off my card because I use it in store and immediately pay it off in store. It is the only one I have found that I can do that with. If I do not have the money in the bank to spend, I won't charge it to my store card. I drove the poor teenage girl crazy when I opened the card because I read through the entire brochure about the card and then I asked a ton of questions as well. She even had to call customer support for the card service just to answer all of my questions! I keep my balance at zero at all times because of being able to pay off the balance in the store immediately and I don't have to deal with any nasty interest rates.

Jack Byrns
February 26, 2014 at 9:42 pm

Inquiries remain for 2 years? You apparently don't know about freezing reports and doing the B*

Roy F
February 12, 2014 at 10:44 am

I was required to provide my SSN when opening a store credit card. This seems to be an abuse of the SSN. When was the SSN a requirement for a credit card ?

Maurice H
February 12, 2014 at 8:50 am

If you can get a real low int rate with your regular credit cards like Citi or Chase you really don't need a store card which usually have very high APR's. I use a Citi Preferred and because of my good score have a real low APR. Keep your credit history good and watch the offers come in then make a choice. Some do have incentives like a Macy's which gives you an additional 20% off, but the minus is the very high int rate if you don't pay it in full. Stick to your reg cards, as they will also back you on your purchase.

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