As summer wanes and crisp weather approaches, it’s time for a shopping trip to snatch up some chunky knits and over-the-knee boots. With the latest trends in-hand, we’re all bound to have a similar experience when the sales associate says, “You know, if you open a store credit card, you can save 20% on your purchase today.” While a discount is enticing, there are potentially negative impacts to your credit score to think about. Keep scrolling for everything you need to consider before adding a shiny new retail card to your wallet.

photo from urban outfitters

brocade bag from free people

1. A new inquiry will ding your credit score.

When you apply for a new card, the issuer makes an inquiry into your credit history to ensure you are a reliable borrower. Each of these inquiries dings your score by a few points. This won’t have a large or long-term impact, but avoid applying for too much credit in a short period of time. Before opening a new card, consider your timeline for a new home, car, or other big purchase requiring a loan or lease. These will also require credit inquiries, and you don’t want them to happen all at once.

photo by sandra semberg

2. A new card will lower the average age of your accounts, which could hurt your score.

A longer credit history is good for your credit score, since it gives lenders more insight into your dependability as a borrower. Each time you open a new credit card, the average age of your history lowers. If you already have a long and favorable credit history, opening one new card isn’t a big deal. However, for younger people with a shorter average credit age, this is something to consider.

wallet iPhone case from urban outfitters

3. Retail credit cards carry high interest rates.

The most important piece of credit card advice I can offer is this: pay off your balance month to month. Every point, mile, discount, and perk is completely offset by the interest you’ll pay if you carry a balance! An average credit card has an Annual Percentage Rate, or APR, of around 15%. But more than half of all retail cards carry an APR of over 25%. If you pay off your card each month, this won’t matter because you will never pay interest. Unfortunately, the average person does carry a balance, so the APR is a major factor.

photo by dan roberts

4. You may get a better return with another card.

Retail cards are enticing because of the store credit they offer for each dollar you spend. I mean, who doesn’t love getting Nordstrom Notes in the mail? However, you can often earn a higher return when you spend money with another card. Let’s take the Citi Double Cash card, for instance. This is a no-fee card that offers 2 points for every dollar you spend anywhere, on anything. And you can redeem those points for cash, which is more versatile than store credit. The Chase Freedom is another no-fee card I recommend. It offers 5% back on rotating categories including restaurants, grocery stores, gas stations, wholesale clubs, and even department stores. My personal favorite and most-used card is the Chase Sapphire Reserve. This one is totally worth the annual fee if you have a high credit score and travel and dine often.

convertible backpack from free people

5. Sometimes a retail-branded card is worth it.

Some retail cards offer attractive points multipliers, plus other benefits — exclusive discounts, preview parties, personal shopping perks, and early access to sales. If you are a loyal shopper and find value in the VIP status a card offers, then it could absolutely make sense to open a card on your next outing. Happy fall shopping!

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1 comment
  1. 1
    Kelly | September 19, 2017 at 1:27 pm

    Thank you for the advices! Anyway there are some benefits!

    Reply
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