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Don’t Let Store Credit Cards Lure You Into Sinning

1662648_f260I saw an article recently about retail store credit cards that I thought had some very good information. It was on the site It pointed out that sometime during the fourth century, a monk defined what he called “the Eight Temptations of Man”. A couple of hundred years later Pope Gregory is thought to have changed this and renamed them “The Seven Deadly Sins.” As the article reported, it didn’t take very long for temptations to become sins. And the same thing could happen to you today, especially when you are retail shopping.

The siren’s song

Today’s retail stores have become very adroit merchandisers. They bombard you with holiday sales, end-of-season sales, discount coupons, member specials, deals-of-the-day and so forth. While these can entice you into a flurry of buying, the real temptation is not these. It’s the store credit card. It will give you immediate money off but can lead you to the sins of greed and sloth.

Why your credit score will drop

Part of your credit score is determined by what’s called your debt-to-credit ratio. This is the difference between the total amounts of credit you’ve used vs. the total amount of credit you have available. For example, if you had a total credit limit of $10,000 and had racked up $5000 in debt, your debt-to-credit ratio would be 50% – or way too high. So, getting back to the store credit card example, if it had a $500 limit and you maxed it out, this would cause your credit usage to go through the roof. Consequently, your credit score would drop.

One of the major downsides

One of the biggest downsides of a store credit card is that they tend to have very low limits and high interest rates – usually 20% APR or more. What this translates into is that if you revolve that credit for just one month, you may lose any discount that you had gained by opening the card.

Other drawbacks

In addition, there are other things having to do with store cards that can affect your credit score. An example of this is that your credit score takes into account how long you’ve had credit. This is calculated based on the average age of all your cards. If you are continually opening department store cards, the average age of your accounts will drop and this will negatively affect your credit score. Another problem is that every time you inquire about credit, it dings your credit score.

Add them all up

If you combine these three elements of what opening a retail store credit card could do to your credit score, you can see why it would have a dramatic impact – and not a good one.

The good side of a retail credit card

To be fair to retail credit cards, they can have a good side. If there are stores where you shop regularly and are loyal to, its credit card could make sense. For example, you might find that your store’s private label card offers 5% cash back, which could be a very good incentive for someone who shops there often. If you have a store card, you may be provided with advance notices of sales and closeouts, which would make for added value. But the important thing is to not be a sloth. Pay off your balance every month without fail and don’t revolve your credit. That way, you would be able to enjoy the benefits of a retail store card without experiencing the negatives.

Lower limits can mean less debt

The upside to retail store cards that usually have very low limits, making it difficult for you to create a mountain of debt – so long as you’re not also running up debt on your standard credit cards. Whether it’s a retail store card, Visa card or MasterCard, the important thing is to always to pay off your balances every month to avoid those sky high interest rates that can just bleed your finances.

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