Are instant approval store credit cards a good... - Limited/Bad/Fair Credit Questions


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Credit Card Applications » Questions » User Questions » Limited/Bad/Fair Credit » Are instant approval store credit cards a good choice?

Are instant approval store credit cards a good choice?

Answered on | Updated on November 23rd, 2010
The content is accurate at the time of publication and is subject to change.

Signing up for a store’s instant approval credit cards are a temptation that many cannot resist. However, it would be wise to weigh the pros and cons before opting for the store cards. Making purchases and getting an instant discount of 10% can be quite irresistible. But it is probably not such a good idea after all. Firstly, one has to ask oneself in one really needs another credit card? And if the answer is a “no” or even if there is slight uncertainty then maybe, it’s best to decline the offer very politely. Just having too many of credit inquiries on one’s credit report can create havoc with the credit scores of the individual. Experts say that each time a person opts for a store card it lowers the credit score of the customer’s by at least 20 points. The enquiries can be damaging if done too often.

Having multiple, store cards could be detrimental. Generally individuals who are equipped with these types of cards tend to go out of control as the purchasing power increases as the sole purpose of these cards is to get the person to spend more and more. Once that happens and after racking up some huge balances, one realizes that these credit cards also carry huge interest rates and it is typically 50% higher than the general cards such as MasterCard or Visa.

Store credit cards have less utility compared to general use credit cards such as MasterCard or Visa, as they can be used only with the retailer who issues that card. Even in case one does not plan to use the store credit card but simply wishes to earn the 10% discount upfront, it’s still a bad idea. One would look more risky to lenders by possessing additional credit lines on the credit report. This kind of “risk potential” could trigger off all sorts of unwanted consequences. For instance, it could trigger a ‘universal default pricing’ on all the other card accounts. This could happen, even without carrying forward a balance and without making late payments since with most cardholder agreements issuers can impose penalty default pricing for any trivial reason which could be even the slightest hint of an increased credit risk.

So the bottom line is that the store credit cards are generally good deals only for the retailer and not the consumer. As stores have an increase in sales there are increased profits for the retailers and hence another way to make money.

Disclaimer: This editorial content is not provided or commissioned by the credit card issuer(s). Opinions expressed here are the author's alone, not those of the credit card issuer(s), and have not been reviewed, approved or otherwise endorsed by the credit card issuer(s). Reasonable efforts are made to present accurate information, however all information is presented without warranty. Consult a card's issuing bank for the terms & conditions.
All rates and fees, and other terms and conditions of the products mentioned in this article/post are actual as of the last update date but are subject to change. See the current products' Terms & Conditions on the issuing banks' websites.
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