ASK A FINANCIAL PLANNER: 'Should I sign up for a store credit card?'

Samantha Lee / Business Insider

Certified financial planner Sophia Bera answers:

I feel like every store I ever visit offers me a store credit card in exchange for a discount on my purchase.

Is there any reason I shouldn't start accepting them? I don't have credit card debt and I'm pretty responsible with the cards I already have.

Like so many questions, the answer to yours is … it depends! There are a few things you should think about before accepting the offer of a store credit card.

Why you should get one

Let’s say you only buy your work clothes from one store. A store credit card can get you a discount not just on your purchase the day you sign up for the card, but on future purchases, too. You’ll be sent coupons and will be eligible for deeper discounts during sales. (When I used to have to put on a suit and heels to go to work every day, I found one place to buy my suits and got a store card to help make them more affordable).

If you’re incredibly loyal to that particular store, and you’re disciplined about paying your credit card in full and on time, you could save some money by using a store credit card. You also might get a big discount up front at the time you sign up, but that also means that you’re on their mailing list and they’re going to constantly remind you about shopping in their store and online.

… and why you shouldn’t

There are many more reasons, in my opinion, to opt for other credit cards instead. Here’s why:

Store cards carry high interest rates

Store credit cards generally have higher interest rates — often around 25%. Yikes! If you tend to carry a balance on your credit card, an interest rate this high will come back to bite you. The highest interest rates I’ve ever seen are with store credit cards.

There's pressure to spend more

All those coupons and discounts you’d get as a cardholder encourage you to spend more. That’s great for the store, but not so great for you. Here’s the thing with sales: If there’s an item you need that you would have bought at full price, getting it at a discount is awesome. However, buying something you don’t need on sale is still spending money you wouldn’t have spent. When you sign up for a store credit card, you’re also signing up for frequent nudges to buy, buy, buy, which means you’re often spending more than you would normally.

You don’t save as much as you think you will

Very few people only shop at one store, so you likely won’t save that much. Let’s say you save $100 in a year — how much did you have to spend to save that $100? There are better ways to save or make $100 than using a store credit card.

Other credit cards offer more or better rewards

If you’re looking to earn rewards for your everyday spending, there are lots of credit cards available that aren’t tied to any particular store. You can earn cash back, or rack up points that you can spend at retailers, on travel, and more. You’ll get so much more flexibility in how you use your rewards. I also like figuring out how to maximize my travel rewards just by spending money on things I would normally purchase instead of having to shop at a particular store. Why limit yourself?

This post is part of a continuing series that answers all of your questions related to personal finance. Have your own question? Email yourmoney[at]businessinsider[dot]com.

Sophia Bera, CFP® is the Founder of Gen Y Planning and has been quoted in The New York Times, Forbes, Business Insider, AOL, The Wall Street Journal, and Money Magazine. She tweets, travels, and loves helping millennials manage their money more effectively. Curious? Sign up for the free Gen Y Planning Newsletter.

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