Recession Tips – How To Save Money Now

We’ve all heard the sales pitch before: “Would you like to save 20% on today’s purchase by signing up for an XYZ charge card?” The cashier delivers the pitch with a smile. For those of us who say, “No,” the cashier usually looks around and whispers to us. He’s says something along the lines of, “You should just sign up for the card to get the discount and then just pay it and cancel the card before you have to pay interest.” He acts like he’s helping you save money by telling you a secret he shouldn’t be telling you but this is terrible advice that should never be taken.

Here’s what’s wrong with store credit cards.
1. The interest rates are usurious. In other words, they’re really high. Think 20%-30% high and that’s for people with good credit. There is no reason to pay these high interest rates unless someone is threatening to break your legs.
2. The store runs a regular credit inquiry on you. This means it registers on your credit report. This factor alone should be enough to dissuade you from applying for the card. Credit report inquiries of this type negatively impact your credit score. And although credit card companies deny it, they may take the actual store into consideration when looking at the rest of your credit report. If you apply for a store credit card at Store XYZ and the credit scoring algorithm determines that most people who apply for Store XYZ credit are deadbeats, you get thrown into the deadbeat pile. Not good.

The retail stores know that most people who sign up for the card will not pay their full balance off on the first payment. They know that they will make multiples of the original discount you received on merchandise in their cut of interest and fees, not to mention repeat business by people who are spending money they don’t have by charging their purchases to their store credit cards.

Signing up for store credit cards is a surefire way to lose money.