Credit Scores And Shopping Stores | The Reality Of Store Cards

By Allison Yu - The Pingry School

I don’t know about you, but whenever I hear the word “discount” my ears perk up. I’m a thrifty shopper; saving money is my pride and joy. Opening a credit card to get instant savings sounds both appealing and convenient. You might be getting a wonderful deal on those designer heels today, you had better be prepared to buy some flippers too, because you’ll be swimming in high interest rates tomorrow.

Do You Want 15% Off? 

Luckily, when I first heard a cashier offer a store credit card, I was with my mom—and we all know that mothers know best. As we were checking out, the cashier asked us if we wanted to open a credit card in order to get future exclusive discounts and 15%t off our purchase right now.

At twelve years old, I was just learning how to calculate percentages, and I knew that fifteen percent off, $20, was…well… just better than paying full price. While I was nodding my head in affirmation, my mom merely smiled and shook her head “no” as if she had heard this line one too many times.

As we paid, I was left puzzled and I asked my mom why she didn’t jump on that deal. She explained to me, as mothers do, that opening a store credit card was “bad”. As was my custom at twelve, I nodded without really understanding. But now, I've learned that opening a store credit card has many subsequent cons that we don’t think of when we’re impulsively shopping.  Here are the top things to keep in mind when you're faced with the credit card challenge.

Your Credit Score And The Card's Hidden Drawbacks

Your credit score—as my mom later explained to me more fully—is the number that represents how likely you are to pay off your credit card bill. Store credit cards are a trap: they entice you with short-term benefits but they fail to disclose the hidden drawbacks that, when ignore, can make your credit score plummet. Log into NextGenVest.com and take the 2 minute video certifcation on "Credit Cards 101" for more detail!

Store credit cards usually have high annual percentage rates (APR) , which means that the discounts saved today will be offset by the ridiculous interest rates of 22.9% if paid late, as compared to the average 14.95% of a regular credit card. Sometimes, these store credit cards have a very low limit. It becomes too easy to go over this low limit when one is in need of instant gratification. Remember: it all adds up.

The Longterm Effects

Believe me, I understand that in the frenzy of shopping, we often forget to rationalize the situation. But it’s important to remember that—especially as a student—we should build up a good credit score so that our scores don’t haunt us for the rest of our adult lives. Failing to maintain a good credit score will continuously yield greater repercussions: lower scores can eliminate chances of securing a loan, buying a house, or starting a business. But, even though it’s a snowball effect, please refrain from buying snowshoes to ease the pain. It will only worsen a poor credit score.   

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