4 Questions to Ask Yourself Before Opening a Store Credit Card

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Store credit cards could help you save big on holiday shopping. Here are some questions to ask yourself to decide if you should open one. 

The holiday shopping season is just around the corner, or it may already be here if you’re an early shopper. Even if you don’t have too many people on your list, the cost of gifts can add up quickly. Stores may try to entice you to open their credit cards in order to save as much as you can. But that may not be the right choice for everyone. Here are four questions to ask yourself before you say yes to that overeager cashier with the credit card application.

1. How often do you shop at the store?

Opening a store credit card could make sense if you frequently shop at that store all year round. You’ll have plenty of opportunities to take advantage of its perks and reap any rewards it offers. But if it’s a store you shop at once or twice per year, it might not be worth adding to your wallet. It’ll just be another account you have to keep track of and you probably won’t get that much use out of it.

2. What kind of benefits does the card offer?

Some store credit cards offer better perks than others. For example, some may offer rewards that you can put toward future purchases. Others may earn you free shipping when you order online or give you access to exclusive discounts.

It’s important to weigh how much the store credit card will actually save you before applying. Knocking a few dollars off your bill might not be worth it. But I’ve had a store credit card save me more than $100 on a single purchase, so in that case, it was definitely worth opening for me.

3. What are the consequences if you don’t keep up with your payments?

Like all credit cards, store credit cards charge you interest if you fail to pay your balance in full at the end of the month. The average annual percentage rate (APR) for all types of credit cards is around 24.24%. If you had a $500 balance on a card with this APR and only made the $40 minimum payment each month, it would take you 15 months to pay off and you’d owe $70 in interest on top of your $500 principal.

Store credit card APRs can be even higher than this. Their credit limits are generally low, so you probably won’t be able to rack up large amounts of debt on them. But there’s still the potential for costly interest charges, especially if you keep charging more to the card before you pay off your existing balance.

This may not concern you if you’re confident that you’ll be able to pay your balance in full each month. In this case, you won’t owe any interest. But if you’re concerned about falling behind on your payments, it might be best to avoid this risk and skip the store credit card. If you really need to buy on credit, consider a card with a 0% introductory APR or a low standard APR.

4. How will opening the store credit card affect your credit?

Every time you apply for a store credit card, you’ll have a hard inquiry added to your credit report. This drops your credit score by a few points. It’s not a big deal if you get approved for the card because the boost you’ll get from having access to more credit (via your credit utilization ratio) will more than offset it. But if you’re not approved for the card, it could just make your credit score even worse.

Requirements to open these cards generally aren’t that stringent, but it doesn’t hurt to inquire about them before you apply. If you have poor credit or you’ve recently applied for one or more loans or credit cards, now might not be the time to apply. The lender might be concerned that you may not be able to keep up with your payments due to your low score or recent behavior. Rather than take this chance, consider waiting and apply for the card in the future when your credit is on better footing.

Remember, while a store credit card can be a big help during the holiday season, it doesn’t go away when the holidays end. You’ll need to keep an eye on that account as long as you have it to make sure that you’re keeping up with your payments and that someone isn’t using it without your knowledge. If you’re not comfortable with this, it’s probably not the right move for you right now.

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