When Is It a BAD Idea to Take a Store Credit Card

So there I was in my favourite clothing store in Fairview, and when I was ready to pay, the gal behind the counter said a few magic words: “Would you like to save an extra 20% today by applying for a [enter store name here] credit card?” I instantly think WOW this is my lucky day! But this got me thinking, is it really a deal?

I actually paid for my purchase with cash. I did not get this “deal” but I wanted to get more info on if this 20% discount was really a deal or not.

There are pros and cons to this.

Let’s start with the cons:

• Yes, the offer sounds good, but these store cards traditionally have high-interest rates. If you are buying something that is $200 plus a 20% discount is $40. Sounds good eh? It makes this purchase more “affordable” by putting more cash in your pocket.

• These credit cards often have high-interest rates – the average is 24.99%. If you carry a balance, this rate means that the 20% discount is eaten up by finance charges.

• These cards often have a short introductory period. Thus, you can enjoy a low-interest rate charge for the first two to three months before the rate will be increased to a larger rate.

• These credit cards often have a minimum payment, so it will take you longer to pay off the bill.

Here are the pros:

• If you can pay off this card in 30 days (by the due date), you save 20% of the purchase price.
  

Summary:

if you can pay off this balance by the due date, you are good to go. If you cannot, you’re better off using your bank credit card or paying cash. More than likely, if you are unable to pay off the balance the 20% discount you were offered will be eaten up by interest, and you will end up paying more.