So you shop there all the time, in fact its your favorite store in the whole wide world and to top it all up, you get a 15% discount on your purchases when you sign up for the store credit card. So in your mind and according to the friendly and persuasive clerk at the check out line, it makes sense to sign up. Well, not so fast! Let us take a look at the reasons why you should not sign the dotted lines ….
Addictive: If your goal is to save money and live your best financial life, then you have to watch what you buy. While you are in the process of building wealth through savings and meaningful investments, you should not make a habit of shopping indiscriminately. You should buy what you need and not what you want so that you can have enough money to build your wealth. If you have a store credit card and will get incentives for using it, what will really stop you from confusing needs and wants? How will you stop yourself from going back every day, week or month to buy what you think you need, but which is really what you don’t need if you want to live comfortably tomorrow?
More Expensive: So you get to save $10 off your $100 purchase just by putting it on the store credit card. That could be sweet if you pay off your bills right on time, do not pay just the minimum balance and there are no fees or charges associated with the use of that card. The truth is that the stores and the banks they work with know that they will gain much more than the 10% they gave you off the merchandise. In reality, you may forget to pay off the balance as at when due, or you may not have enough money to pay off the entire balance, especially if shopping in that store has now become an addiction as earlier discussed. The truth is that you have no guarantee that you will be able to avoid the fees, interest and charges associated with that card once you sign up for it. At the end of the day, you may now find yourself paying far more than the $10 you thought you were saving on your purchases when you signed up.
Your credit score: Your credit score is determined by many factors, among which are the amount, balance and payment of your credit cards. You have to realize that one of the factors that can impact your credit score negatively is the percentage of department store accounts or charge cards to all of the accounts in your credit file. Therefore, if your credit profile is full of debts such as store credit cards, then you are doing your credit score more harm than good. So think about how much you are saving on that new $100 dress and compare it to how much more you have to pay for a mortgage or car note because of a lower credit score, before signing the dotted lines.
As we approach the holiday aka shopping season, you have to pay close attention to what you buy and how you pay for it. You are really better off buying what you can afford right now and which you have the money to pay for immediately. If store A wont give you a 10% discount on the dress you want if you do not sign up for their credit card, then do yourself a favor by walking over to store B that is ready to sell the dress at the real and lower price. Your financial life is always at stake and no one can take better care of you than you. You should treat your financial life like a business, so you must work hard and make sacrifices to save up enough capital to put to work for you, and then you can make profits out of which you can spend money tomorrow. If you spend all your capital on servicing debts you incurred to buy shoes and clothes today, there will be no profits tomorrow.