Getting a deal on holiday purchases can end up costing you more in the New Year- a lot more, in fact. The reality of a cheerful sales clerk asking, “Would you like to save 20 percent on your purchases today by opening a store credit card?” Sounds tempting, right? But these cards can ultimately hurt your credit score. Store credit cards can have a large impact on your credit usage, which is a big factor in credit scores. Applying for these cards requires an inquiry on your credit report and reduces the average age of your credit accounts.
Store credit cards have significantly higher APR’s and it is easy to fall into debt. The credit limits on these cards are typically 10 percent compared to other cards. How much of your credit limit you use has a substantial impact on your credit score. The one factor that matters more is paying on time. Credit experts advise staying below 30 percent of the limit on any card. Consumers with the highest credit scores use less than 10 percent.
When you apply for a store credit card, the card issuer will pull one of your credit reports. This helps qualify you, but it can cause a temporary dip in your score. On top of potentially hurting your credit scores, retail cards have usability issues. These cards are good only at one store or retail chain. They are typically accompanied by high interest rates and severe penalties if a payment is missed. These cards also have less security features.
If you shop at a particular store often, it might be worth opening a store card to access ongoing discounts, presales and insider benefits. But avoid making this decision lightly and in the checkout line.
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If you have any questions on this topic or are in financial crisis and considering filing for bankruptcy, contact an experienced Miami bankruptcy attorney who can advise you of all of your options. As an experienced CPA as well as a proven bankruptcy lawyer, Timothy Kingcade knows how to help clients take full advantage of the bankruptcy laws to protect their assets and get successful results. Since 1996 Kingcade Garcia McMaken has been helping people from all walks of life build a better tomorrow. Our attorneys’ help thousands of people every year take advantage of their rights under bankruptcy protection to restart, rebuild and recover. The day you hire our firm, we will contact your creditors to stop the harassment. You can also find useful consumer information on the Kingcade Garcia McMaken website at www.miamibankruptcy.com.