By: Shannon Cornejo
I would be willing to bet that, at some point in your life, you’ve been offered a retail credit card during a checkout experience. And if you haven’t, you’re sure to be offered one during your holiday shopping. At first, you might wonder if you have enough time to fill out the application before all the big-screen TVs are gone, or if the discount will be big enough for what you’re buying. But for now, let’s play a game of “Ghost of Christmas Future” and look at some ways this card might impact your credit:
Most retail credit cards will offer you exclusive cardholder coupons or a discount on your first purchase, which is very tempting. But don’t forget to ask what the interest rate is! A survey conducted by CreditCards.com showed that the average interest rate for retail credit cards reached 23.23% in 2014, which was eight percentage points higher than the national average for general-purpose cards at the time. That will take the jingle right out of your bells if you let that first purchase revolve for a month or two after receiving a discount of only 10-20% of your opening purchase. Another thing to remember: Each application for any type of credit, store credit cards included, is a hard inquiry against your credit score, which can lower your score each time it’s done.
Don’t lose that holiday shopper spirit, though; not everything about a store credit card is bad! If you are just establishing or rebuilding your credit, these cards can be a good stepping stone for you to get some positive payment history and improve your score. But keep in mind that the balances need to be kept to a minimum to avoid maxing out the limit. If the card does show a high utilization or is maxed out, this will impact your credit in a negative way and can give lenders the impression that you can’t handle the lines of credit you already have. And since these cards usually have lower lines of credit, maxing out the card or coming very close can be easy to do. So as the song warns, “you better watch out!”
Retail cards can be on the naughty or nice list. If you choose to apply for a card with a store, the benefit or damage that occurs really comes down to how you use and pay back your account. If you choose to open a card with a retail store this holiday season, carefully take advantage of the perks and benefits that come with it. But if you somehow find yourself in a bind or with more debt than you planned for, stop by your local VyStar Credit Union branch or call our service center at (904) 777-6000 or 1 (800) 445-6289 to see how we can help you repair your credit.
The content provided in this blog consists of the opinions and ideas of the author alone and should be used for informational purposes only. VyStar Credit Union disclaims any liability for decisions you make based on the information provided.