Black Friday's Retail Store Credit Card Scam
With Black Friday just five days away, I’d like to take this opportunity to remind you to steer clear of retail store credit cards.
Of course, more than a few of the stores you visit on Friday will try to lure you in with big promises …
“You’ll save 10 percent on today’s purchase by applying for a retail store credit card,” they will tell you.
Just about every major clothing and electronics store has promotion aimed at getting people to sign up for a store-specific credit card.
But retail store credit cards will hurt your wallet and your credit score. Avoid them at all cost!
Here’s just one downside to consider: Many stores promote their store-specific credit cards by offering a 10 or 15 percent discount on same-day purchases if you open an account.
Let’s do the math and see how this adds up …
Imagine that you are buying a pair of $60 jeans from the Gap when the cashier tells you that you will get 10 percent off your entire purchase—$6—if you open a Gap credit card.
You figure it is a wise move, so you sign up on the spot. After all, you’ll save $6, or so you think.
But consider all the different ways you might end up spending MORE money:
– If you do not pay this and subsequent bills immediately, you will have to pay interest
– Especially during the holidays, you will be more likely to make purchases you cannot afford.
I should take advantage of this offer, you might think, piling a few more items in your shopping cart and justifying the excess purchases because you are buying gifts.
But you are probably not staying within your budget, so that $6 you “saved” will cause you to make a rash decision to blow your holiday shopping budget.
– You have added a credit inquiry to your credit report. Credit inquiries count for 10 percent of your credit score, so your score drops a few points.
This might not be a big deal, unless you plan to open another credit card, apply for a home loan, or get a car loan in the next few months.
If you do, you might pay higher interest rates, which means that $6 “savings” just cost you a bundle.
– Ever heard of retail therapy? Having credit cards in your wallet strengthens your ability to make emotional buying decisions by creating opportunities for you to charge things you do not need.
My point is that you most certainly do not save a single dollar by opening retail store credit cards.
Still not convinced? Think of it this way: Why would retail stores promote these cards with discounts unless they know they can eventually make money off the retail store credit cards?
There are other reasons retail store credit cards are a bad idea. Click here to read about the impact retail store credit cards have on your credit score.
