Sometimes Saving 15% on Your Purchase is Not a Good Deal

November 21, 2007 By Debbie Dragon

Most retail stores have their own credit cards. How many times have you gone up to the check out counter with your selections only to hear the cashier ask, while handing you an application and a pen, “Would you like to save 15% on your order today and apply for the blah blah store credit card? We offer instant approval!”

It might sound like a good deal at first- after all, saving 15% on the $100 order you have waiting to be rung up would let you keep $15 in your pocket! Why wouldn’t you want to save $15 on today’s purchase?!

There are a number of reasons why you should think twice before signing by the “X” on a retail credit card application. First, retail store branded credit cards offer some of the highest interest rates in the credit card industry. While most credit card issuers calculate the interest rate for cardholders based on the individual’s credit history and credit score, many retail store cards are just offered with higher interest rates- at times, the state maximum. If you save 15% off the day’s purchase, but any charges made on the credit card from that moment on are receiving a 22% interest rate- is that really a good deal?

Even if you do happen to find a retail credit card with a reasonable APR, it doesn’t guarantee that the rate will stay reasonable. Card issuers have the right to raise your rates pretty much whenever they want, for whatever reason they want (unless it says otherwise in the cards terms and conditions). Some of the most common reasons credit card interest rates get increased:

You were late on another credit card or loan payment
You have too high of a balance on another credit card account
Too many credit inquiries in a short period of time

Before you sign the application for your 15% savings, really consider whether or not you need another credit card, whether the $15 you save today is worth having an additional credit card account on your credit report, and how you typically make payments on your accounts. If you pay them off religiously each month in full, you can usually avoid interest fees all together within the grace period- just keep in mind that not all credit cards offer the grace period and you could still end up paying interest or finance charges on each purchase.