With the holidays upon us, we are all thinking of ways to save a few bucks on our gift buying this year.
You might think about taking one of those department store employees up on their offer to extend you some extra buying power. That is because, along with all of the promotions and sales flyers we receive, there are numerous store credit offers vying for our attention.
While these offers may sound tempting, consider asking yourself: Is it a bad idea to open a store credit card to cover holiday purchases?
Depending on your current financial and credit situation, you may be better off foregoing that tempting offer.
There are some crucial things to consider:
A few of them run upward of 28 percent APR. That is almost double the average interest rate of a bank-issued credit card.
If you are telling yourself, “I plan to pay it off immediately so I do not get charged any interest,” think again.
Although most of us have every intention of paying our credit card bills in full when we receive them in January, few of us actually succeed.
We invariably charge far more than we plan to each year. As the bills roll in, there simply is not enough to cover them all.
On the more optimistic side, let’s say you have made a budget for how much you plan to spend this year and are sticking to it.
If you are standing in front of the department store cashier and she offers to save you an extra 25 percent on your purchase, it may be worthwhile to consider such a generous proposal.
“Store credit cards almost always
have a higher interest rate.”
Ask yourself some questions:
- Do you know for certain how much you have charged to your credit cards so far this billing cycle?
- Will you have enough to pay the store card bill in full when it comes?
- Are you likely to continue using this store card if you have it in your wallet?
By approaching the idea of opening a store card for holiday purchases with a rational view, you are more likely to make the right decision for your situation.
Finally, as you are standing there at the register considering whether or not to open a store card and charge your lovely new gift purchase to it, think about how you had planned to pay for it when you picked it out.
If you have the cash or had allocated a credit card to put it on, then consider doing that. It is pretty hard to get into debt trouble by paying cash and sticking to your plan.
Photo source: credit.com.