by Nicolle Morales Kern
“Would you like to save 20 percent of this purchase by signing up for our store credit card?” I’m sure you hear some version of this question when you’re out shopping. It could be at Target, Express, Victoria’s Secret, Barnes & Noble, Sear’s, Best Buy, Home Depot, and many other stores you frequent on a daily basis.
If you ever answer “yes” to this question, it might not be the most financially literate thing to do. Of course, it’s enticing (hello 0.00% APR) to save money on your current and future purchases, but that really only works if you pay the full balance on each credit card every month. Store credit cards carry higher APRs (that’s Annual Percentage Rate).
Despite what you might think, stores didn’t jump on the credit card bandwagon after the first credit card emerged. Stores actually used to allow their trusted customers (those they knew by name) to open credit accounts, which made it possible to shop and then pay the bill at the end of the month.
But what does that mean for us today? Well, any company that signs you up for their credit card charges you interest on any money that you borrow. Even though each of your credit cards comes with an agreement, you may not understand all of the conditions that you are “agreeing” to. One of the secrets of credit cards lies in the minimum monthly balance that you can pay. By only paying this, you are setting yourself up to pay back everyday purchases for up to 30 years.
If, after following the research I’ve laid out, you’re ready to take your scissors to all of your cards, think again. Cancelling your credit cards is detrimental to your credit and FICO scores. You know, the scores used to determine your eligibility for loans as well as the interest rate you pay on any type of loan – from credit cards to student and mortgage loans. Here are eight things you should know about any credit cards you may have.
But do not despair if you’ve crossed to the dark side and have credit card debt; there are ways to beat the debt collectors. One way is to become a deadbeat customer, which means that you pay your credit cards off in the full amount each month and don’t make the companies money. Another way is to just charge one or two purchases a month (that could be gum at CVS) and then pay off that balance each month.
I know it seems unavoidable to have a credit card in our age of plastic money (do you even know what cash looks like?), but if you choose to accept a store credit card, then stick to the ones counted in the top five that are likely to give you the best benefits.
To learn more about Nicolle, visit Culture Jaunt.
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Disclaimer: The views and opinions expressed in this article are solely those
of the author and should not be understood to be shared by Being Latino, Inc.
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About Nicolle Morales Kern
Great article and I hear that statement a lot when I go to the store and always say NO you don’t need all of those credit cards with ridiculous APR all you need is one card for emergencies or to use for a car rental or hotel and maybe an airline card. While they help build credit history they can bury you in debt. If I don’t have cash I don’t buy it. I learned the hard way with credit cards minimum payments are traps b/c they only go toward interest not balance