Should You Open a Store Credit Card on Black Friday?
Black Friday has become known for terrific sales to kick off the holiday shopping season. If you visit some stores this Black Friday, a store clerk will likely ask you, “Would you like to save X% by opening a credit card account?”
Typically, stores offer 10% to 15% off your first purchase when you open a new credit card account. But on Black Friday, some retailers could offer as much as 20% off your initial purchase. Some stores designate special “fast checkout” lines to customers willing to open a new store credit card. While these immediate savings may sound tempting, they may not be the best financial decision for the long term.
Regardless of whether you are approved for the account, any new credit card application is considered a “hard inquiry” on your credit which can drag down your credit score. Depending on your personal financial situation, opening a new credit card or two may not drastically hurt your credit score, but this type of financial decision isn’t one that should be made in the hectic line at your favorite retailer. This should take place after careful research into the terms, restrictions and fees associated with the offer.
Store credit cards generally have much higher interest rates, since the stores have to pay for that discount in some way. Even if you plan to pay off the purchase immediately, there are three concerns:
1. Store credit cards typically have low credit limits. So just making a few purchases can max out your credit limit or give you a high debt:credit ratio which can further harm your credit profile.
2. When you open numerous store cards, it can become difficult to keep track of all the different due dates and terms of each card; this may cause someone to miss payments and do further damage to their credit score.
3. Open a couple of store cards this Black Friday and come next summer, when you want to refinance your house or finance a new car, that $20 or even $50 you saved when you opened the card is going to look like a pittance compared to the hundreds or even thousands of dollars you could lose when you have to pay a higher interest rate on your loan because your credit score was just a little too low to qualify for a better rate.
There may be times when it pays to open a store credit card account — if it is a store where you shop regularly or you are making an extremely large purchase.