Tuesday, March 6, 2012

Deciding Whether To Get That Store Credit Card

I spotted a perfect pair of jeans while shopping at the mall last week. Not only did they fit my size and style specifications – a difficult task! – but these jeans were also being offered at a great, discounted price. After trying them on, checking myself out in the mirror, and making sure that I felt good about the purchase decision, I headed up to the checkout counter to finalize the sale.

“Do you have a store credit card?” I was asked by the friendly young girl at the register.

“No,” I replied. I’ve used store cards in the past, but never consistently and never for this particular store.

“Well if you apply for store card today, you can get an additional 60% off of your first purchase – in your case, off this pair of jeans.”

I was tempted. I had no intention of keeping and using the card, but why not simply apply for it? I could get a quick discount, I could use the card a couple of times, and then I could cancel it and move on with my life. It seemed as though I had something definite to gain and almost nothing to lose.

Here are the key questions and considerations that rushed through my head at that moment:

-Will I truly cancel the card? There are numerous studies that show store credit cards to be a poor long-term decision. Most of these cards have higher rates and penalties than traditional ones, and the benefits they offer often expire within a matter of months. While it may be difficult to predict without a psychic chat whether one will cancel a card or get sucked into using it, some knowledge of your personality and spending habits should help you answer this question with a good amount of confidence.

-Am I making any major purchases in the next year? Many consumers are unaware that their credit scores take a hit whenever they apply for a new card. This decrease, however, last for only 12 months after the application is made. So if you’re concerned about your credit score and looking to buy a new home or car in the next year, getting a store card – even temporarily – may not ultimately be worth it.

-Are there any cancellation fees? The final and most obvious question is one that should be directed at the employee behind the register. Since I knew I wanted to cancel the card shortly after first using it, it consequently is important to insure that there are no cancellation fees, penalties, or other hidden charges that may come back to bite.

After quickly running through these questions, I finally decided to get the card, take advantage of the 60% discount, and then cancel the card at some point in the next month. Since there are no cancellation fees, I have no major purchases to make in the next year, and since I trust that I’ll be responsible, I concluded that there really was nothing to lose.

Hopefully my tale can be a helpful one to frugal shoppers out there. While a store credit card is usually a poor long-term proposition, there are certainly benefits that can be realized when using it only once or twice – so long as you keep the above questions in mind.

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0 gave me some sugar: