Everyone loves a deal.
Whether we’re searching online for a coupon to save $1 on a box of cereal, getting a loyalty card punched to creep closer to that free 6-inch sub or calling a credit card issuer to get a late payment waived, we’re constantly looking for ways to keep some extra money in our pockets.
However, all deals are not created equal.
Take store credit cards, for example.
Undoubtedly, you’ve had some clerk at some store offer you one of these cards, with a pitch that sounds something like this: “Would you like to save 15 percent off your purchase today by signing up for our new credit card?”
About 99 percent of the time, you reflexively say, “No, thanks. I’m good.” But then there are those other times. Maybe you’re spending a lot of money on clothes in preparation for a new job or for your kids’ new school year. Perhaps you’re loading up on lumber, paint and tools for that do-it-yourself project for your house. Or maybe you’ve finally upgraded that old TV for a state-of-the-art new one to hang on the wall in your living room.
That’s when that 15 percent discount can be really appealing — and understandably so. Saving 15 percent off a $500 trip to Home Depot means real money in your pocket.
It’s not that simple, though. For one, these cards typically come with seriously high interest rates. (A recent CreditCards.com survey put the average retail card APR at more than 23 percent.) Also, you often aren’t given much time to decide if you want to sign up for the card. After all, who wants to take five minutes at the counter to read a credit card’s terms and conditions? Plus, there’s probably a line of people waiting in line behind you, and the longer you take, the grumpier they’re likely to be.
The good news is that there are several easy things you can do to take control of the situation, and put the power back in your hands.
1. Back away. Don’t let them pressure you. When asked if you want a card, politely decline and ask for a brochure. Then, when you are relaxed and have the time, take a few minutes to read the card’s details. (What’s the interest rate? Is there an annual fee?) If they sound good, apply for the card next time you visit that store. Chances are that all the incentives and discounts you liked will still apply, but you’ll be able to make a smarter, more informed — and more relaxed — decision.
2. Pay it off. If you pay off your balance at the end of each month, you’re making that high interest rate a moot point because it never comes into play. And when you do that, you can start making the card work for you by taking advantage of rewards. However, if you keep rolling over balances and getting charged interest on a card with a 23 percent APR, it doesn’t take long at all for the math to start to work against you. For example, if you have a $1,000 balance on a card with a 23 percent APR and just make the minimum payments each month, you’ll end up paying more than $800 in interest on that balance over six years.
3. Shop around. The credit card business is so competitive these days that you shouldn’t have to settle for a 23 percent interest rate, unless your credit is really thin or damaged. If you feel you just have to have that new card, don’t be afraid to shop around and see what else is out there. After all, a card with a lower APR and typical rewards (like cash back) is probably a better deal for you in most cases than a high interest rate retail card with more specialized rewards.
4. Know yourself. If you can’t resist the lure of extra available credit, don’t get one of these cards. If you know you can’t afford to pay your balances in full each month, just say no. No short-term discount is worth getting yourself into a financial situation that you won’t be able to handle and could cost you much more in the long run. That’s true with all types of credit cards — but for ones that come bearing a 23 percent interest rate, it’s even more important.
Ultimately, it’s about taking control. You should never make an important decision about your money in a hurry, and you should certainly never do it without understanding what you’re getting into. There’s simply too much at stake.
More from U.S. News
5 Things to Know Before Signing Up for a Store Credit Card
12 Simple Ways to Raise Your Credit Score
4 Tips for Winning the Retail Credit Card Game originally appeared on usnews.com
