Should I open credit cards in stores: pros and cons

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You, probably, faced offers of shops to open at them a credit card. Many retailers are trying to entice buyers with a lack of interest and big discounts on their first purchase. Of course, these offers are tempting, but you should be aware of the advantages and disadvantages of this type of loan.

Advantages

Credit cards can offer you a lot of good things if you often shop at this store.

Discount and "freebie"

One of the most significant advantages of having store cards is discounts. You get them for using the card at certain times of the year, which gives you the opportunity to earn bonus points or gift cards based on your annual expense. If you are a regular customer of the store, using his card, you can save.

Credit history

If you do not have a bank credit card due to a lack of credit history, you can get a store credit card instead. Many retailers have less stringent requirements than banks. As long as you regularly pay all the payments, you build a good credit history.

Interest-free credit

Many retailers offer interest-free loans to new cardholders, which will help pay off your purchase without undue stress. This is especially beneficial when buying expensive goods. Some stores offer interest-free repayments for 6, 12, 18, or even 24 months.

Disadvantages

Despite all the advantages of using a store's credit card, there are some drawbacks to consider before applying for this type of loan.

Credit check

When applying for a credit card, keep in mind that the store will check your creditworthiness. He will contact the credit bureau and request a copy of your credit report. Now this credit will be reflected in your credit report, which will lower your credit rating by 5 points, even if you have been refused.

Affects credit rating

If you are worried about your credit rating, it would be inappropriate to take a store credit card. Every time you open a new credit line, your credit utilization rate will decrease.

High interest rates

Cardholders who do not pay the debt on time usually pay 25% more. If you know that you will not be able to repay the entire amount of debt, consider this when allocating your budget every month.

Pay more than the minimum payment to avoid high interest rates. As long as you pay more than the minimum payment, you are not paying too much. But remember, these cards tend to have a high interest rate and, when opened, affect your credit rating.

Be a smart buyer: carefully study the conditions and plan your purchases in order not to become hostage to high interest rates.

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