I regret saying “yes” to that store credit card sales pitch
|October 1, 2013|
I know store credit cards don’t always offer the best deal for consumers. And I’m usually quick to say no to these cards, even if the clerk offers a special deal.
But recently I was in Dillard’s shopping for a dress to wear to a wedding. It was late, I was tired and it was pouring rain outside. The store was about to close, and a nice clerk offered to wait for me to grab a pair of earrings to go with my dress.
When I went to check out, 10 minutes after closing, the saleswoman offered an additional 15 percent off my purchase if I opened a store card. And she told me the discount would be good through the end of the weekend. I knew my husband needed some new clothes for work, so I thought that with the discount and the huge sale that was going on, we could really save some money.
The total looked good — my dress actually rang up as a sale item — and I was so tired I forgot to check my receipt for the additional 15 percent discount. When I went back with my husband a few days later, a different clerk told me there was no discount for opening a card and that the clerk from the previous night had given me wrong information. I went to customer service, explained the situation and was told once again there was no discount for opening the card. I really felt duped.
It’s probably rare to be given completely incorrect information about a store card. Yet I’m definitely not the first person to get pressured into opening one despite knowing better. Blogger April Dykman of Get Rich Slowly, got “suckered” into opening a Neiman Marcus card even though she had previously written about a survey showing the annual percentage rate (APR) on store cards is usually about double the average of that on regular cards. In her case, the store had some merchandise she really wanted, she was running late for an appointment, and the clerk told her the store accepted only its own card, American Express, cash or check (the store has started accepting other bank cards since Dykman’s blog appeared in 2011).
Even if there is a discount for opening a card, which is fairly common, many experts advise against getting a retail card just for the savings. For example, blogger Trent Hamm of The Simple Dollar says the discount just isn’t worth it and can even encourage you to spend more. I know it did with my husband and I: Thinking we were getting an additional price break beyond the sale, we grabbed an extra shirt or two.
So, what should you do if you decide to open a retail credit card just to snag a discount?
1. First of all, Hamm recommends paying off your entire balance immediately. Otherwise, you’ll pay the exorbitant interest rate and your balance could quickly spiral out of control. With my Dillard’s card, I signed up for an online account and paid my card off right away.
2. Then, destroy the physical card, Hamm recommends. You can cut it up or use his preferred method — throwing it into a campfire. This will stop you from using the card again and will prevent the card itself from getting stolen. (I cut mine up.)
3. Decide whether to close the account. There are pros and cons to both courses of action. Closing the card can simplify your finances. However, keeping the card open increases your amount of available credit, which can improve your credit score if you also keep your balance low. Hamm recommends keeping the account open to avoid any credit fluctuations if you plan to apply for a mortgage, a car loan or anything else that requires good credit. (I decided to keep mine open — for now.) If you’re not going to go loan shopping anytime soon and have excellent credit, go ahead and close the card. Any score damage will rectify itself within a short period of time.
4. Wait to apply for a loan. If you’re planning to apply for a loan, you might want to wait several weeks or months, especially if you applied for multiple cards in a short time. That’s because when you applied for the store card, your credit report was pulled — and that pull could lower your score by a few points. But if you have very good credit, and the store card is the only credit you’ve applied for recently, the damage is probably minimal. Pull your credit scores before applying for a major loan to see where you stand.