Retail Credit Cards Aren't Worth the Risk

One of the most enticing credit offers today is the deal that promises in exchange for opening a line of credit with a retail store the customer will receive an immediate and sizeable discount on their current purchase. Debt counselors strongly warn consumers who are trying to manage their spending and to eliminate their debt to stay away from such offers.

"A retailer may entice you to open a new account with them in order to receive a ten percent discount off your purchase that day. However, it's very likely that you lose more than what you saved with the finance charges you will incur," said Mark Jones, a counselor with Credit Counseling of Arkansas.

Retail credit cards have exceedingly high interest rates, a fact often ignored by consumers enticed by the companies' lenient approval processes. In addition, retail cards carry annual percentage rates that are, on average, twenty percent higher than conventional credit cards.

Many consumers are unwittingly harming their credit standing by taking out multiple retail cards, which looks bad on a credit report and can be a red flag to loan officers evaluating the consumer for a major loan such as a home mortgage. A heavy proliferation of cards is taken as an indication that the consumer should not take on more debt.,

Still, the offers are tempting, especially at holiday time, the period that accounts for the issuance of the majority of the some 500 million store credit cards currently in circulation. Many times after the initial purchase for which the card was secured the consumer puts the card away and forgets about it, but it still effects their credit report.

"However, if you do take out a store credit card, be cautious," warned Jones. "Obviously it's best to pay your balance in full each month. If you can't do that, you always want to pay more than the minimum, so you can decrease the amount of interest you pay over time."