Own a credit card for that favorite store of yours in the mall? Be careful…
There’s a great story in the NY Times today about the potential pitfalls of store-branded cards, exposing the unsavory terms attached to their cards.
All of us have been asked when checking out at Dillards, the Gap, Lowes Hardware, or any number of other stores if we would “like to sign up for a store credit card and save 15% on today’s purchase??”
If you are in the store to purchase a large item, such a proposition may be tempting, but it appears that the unimpressive terms of the typical store credit card makes the chances of such a discount later being wiped away with just one missed or late payment.
Tara Siegel Bernard’s article yesterday in the NY Times has a lot of good factual and wise nuggets, including this:
…if you strip away the store discounts and brand names that come with these cards, many are essentially the same products marketed to subprime borrowers, or individuals with tarnished or fairly new credit histories. Would you really chose a card with an interest rate of say, 25 percent, or about 9 percentage points higher on average than many other credit cards? …you should also be considering the card’s terms along with the possible effect on your credit score.
She goes on to quote a consumer debt specialist who discusses the negative impact on your credit score that often occurs with the addition of a credit card, and what the reduction of your credit score below certain critical limits can do to you.
We would be wise to heed her warning.
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