Credit cards at the checkout counter

One day, you are at your favorite big box store, preparing to buy an item or two that you saw on sale. You head on up to the cashier and pull out your checkbook, or perhaps a Mastercard. The polite cashier notifies you that if you are prepared to sign up for the store's credit card, you can receive a discount of ten percent on your purchase immediately. You reach a decision to take their credit card, and the sales clerk informs you that the application process will take just a minute.

The procedure is completed in a brief period of time. You then apply your charge to the new credit card account and receive your ten percent price reduction.

Is applying for immediate credit at a department store a savvy choice?
 

As a rule, credit professionals encourage any and all clients to thoroughly decide whether or not to take on new financial obligations. You don't want to just take a credit card on a whim, and you definitely do not want to be lured in by a tiny discount on an one-time purchase. Applying for instant credit may or may not be wise, depending on your own financial situation. Many department store credit cards have significantly higher interest rates than the major credit cards, such as Visa or Mastercard. Interest rates on retail store credit cards can be in excess of twenty percent. what if there's no grace period on purchases? You might have received a ten percent price reduction, but you may be handing over 25% interest on the merchandise from the second you walk out the door! Do you know? Did you take the time to investigate before accepting the charge card? Once you hold the charge card, will you use it? If you do, you could end up paying a lot more in annual interest than if you had just said, "No, thank you" and used the Visa or Mastercard instead.

Multiple applications in a short amount of time can impact the score drastically. Too much financial activity might be a problem if you are preparing to buy a house and you need the lowest obtainable interest rate. That department store account you signed up for might, under the right circumstances, impact the interest rate you get on a house loan. The credit agencies regard it a bad thing to have individuals applying for credit over and over again, and they note all financial queries on the credit report. It is very easy to fall into the trap of simply accepting charge accounts each time you have one offered to you. Each time you sign up for credit, it puts a small "dent" in your score. There are other things to think about besides the interest rate and the grace period.

As a rule, you should avoid these point of sale applications and stick to cautious, well thought out monetary planning. Having your FICO score hurt is far more significant than saving ten percent on your immediate purchase. In the end, you will save a lot of cash by not using the high interest charge card that you did not actually want in the first place.