Money Monday: perils of store credit cards - KFVS12 News & Weather Cape Girardeau, Carbondale, Poplar Bluff

Money Monday: perils of store credit cards

(Source: KFVS) (Source: KFVS)
(KFVS) -

The calendar may say October, but for retailers, we're well into the holiday shopping season! Christmas decorations have been out for a while, and it seems like store clerks are ratcheting up their push to sign you up for store credit cards. 

The pitch usually includes some sort of discount on what you're trying to buy that day. But before you sign up, you need to know a few things about store credit cards.

First, they typically come with a very low credit limit, especially if you have poor credit.

Also, store credit cards have pretty high interest rates, on average of 20-20%. If you're someone who pays off your balance in full every month, that won't matter. But if you're one of the 40% of Americans who regularly carries a balance on your credit cards, that interest rate will come into play.

How you can use the card will be limited, too. There are a handful of cards, like the GAP card, that can be used in a family of stores, but most retail cards can be used only in the store where they are issued.

And financial planners say store credit cards actually encourage debt because there’s a higher temptation to spend. Stores often send out incentives for spending, like discounts for cardholders only emails about sales, and even rewards for your spending. If you’re not careful with your charges, you could easily find yourself with an uncontrollable balance, and that 30% interest rate on top!

Finally, if you sign up for a card at the register, you’re either not given a full explanation of the terms and conditions before you apply, or don’t have time to go over the brochure the clerk gives you.

Financial experts advise to never rush into a decision that involves your credit.  So if you have a favorite store, and you're thinking about getting a store credit card, ask for  more information, then do some research before you commit. You need to know the card's interest rate, and how you accumulate points and rewards.

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