Would you rather save a little bit of money now? Or a ton of money later? That's the decision you're unwittingly making when the checkout clerk chirps, "Would you like to apply for a store credit card? You'll save 10 percent on today's purchase!"
Here are 10 reasons why that 10 percent savings is NOT worth it.
quicklist:1 title: Just Inquiring text: When you apply for that store credit card, right there in line, they check your credit. That counts as applying for credit. And applying for credit hurts your credit score.
quicklist: title: All For Naught? text: Even if you don't activate the store credit card, the application for credit still counts against you. You applied. Done deal.
quicklist: title: Hard Inquiry text: Worse yet, when you apply for credit, that quest for instant cash, called a "hard inquiry" in the credit world, counts against your score for an entire year!
quicklist: title: Financial Effect text: So if you're going to be shopping for BIG credit --like a mortgage or car loan-- in the next year, your score will be lower and you may not get as good an interest rate. You could save $50 now, only to pay $50 more every month on your mortgage!
quicklist: title: Credit Card Differences text: Having store credit cards --and using them responsibly-- does help your credit score, but doesn't help your credit score as much as mainline credit cards do, so better that your open lines of credit be with the big guys.
quicklist: title: Interest Rates text: Store credit cards often have hideously high interest rates, so if you carry a balance, they're painful to pay.
quicklist: title: How Much Is Too Much? text: Having too many credit cards --of any type-- counts against your credit score. Fair Isaac --inventor of the credit score-- isn't saying, but conventional wisdom is that the ideal number of cards is two. Just two.
quicklist: title: Limits text: Store credit cards usually have low credit limits, making it easier to go over the limit and start racking up fees and penalties.
quicklist: title: Your Average Credit Age text: Another factor in your credit score is how long you've had credit. Longer is better. Adding a brand new account lowers the average age of your credit accounts, another big red X against you.
quicklist: title: Vicious Cycle text: And finally, store credit cards CAN yield juicy store coupons and offers, but do you really need the temptation? If you're a shopaholic, better not to be bombarded with incentives to spend more than you can afford.