Some Things to Know Before Opening a Store Credit Card

We’ve all been there. You’ve got an armful of clothes and you’re watching the total inch up higher and higher. Then the store clerk says: “Would you like to open a credit card for an extra 15 percent off?”

What’s the harm in opening a store credit card? It’s tempting, but as with any credit card, there are a few factors to consider first.

When used responsibly, store credit cards may provide great benefits. Some store credit cards offer cash back rewards or points that may be redeemed for discounts. Perks like an interest-free repayment period may help build your credit history -- if you pay your balance in full before the interest accrues. Also, store credit cards (like any credit cards) may add to your credit mix; lenders and creditors generally like to see that you’ve been able to manage different types of credit accounts responsibly.

It may seem like a great idea to open a credit card and get a discount. However, keep in mind that store credit cards are just like any other credit card:

  • When you apply for a new credit card, it will generally result in a hard inquiry on your credit reports.
  • Opening up a new credit card may also lower the age of your newest credit account, which may impact credit scores.
  • Store credit cards may have lower credit limits and may have higher interest rates than some other credit cards.
  • Like all credit cards, store credit cards may charge fees in addition to the interest you will pay on any unpaid balance each month.

What about paying the card off and immediately canceling it? That may sound harmless, but your credit scores can still be impacted by the hard inquiry. This Equifax article helps explain how a store card might affect your credit score.