Understanding the pros and cons of store credit cards

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As you're doing your shopping, you're going to be presented with opportunities sign up for store credit cards with the lure of saving 15 percent off your purchase. Don't do it!

It may be tempting to take the free money, but your credit score has a value as well, and, every time you get a new card, it takes a bit of hit.  It's not terrible, and it's not permanent, but the point is, if you're going to take that hit, you can do way better than a small discount on jeans.

Store cards like Macy's, Banana Republic, Bloomingdale's and Kohl's, offer between 10 – 20 percent off your purchase the day you sign up for them. Compare that with something like the Chase Southwest Card, which gives you 50,000 rapid rewards points. That's around $830 in free travel. 

To get the same value from signing up for a Macy's card, you'd have to spend over $5000 on clothes. 

Most of the time, people sign up for store cards to save $10 to $20 off their purchase. It is better to save that credit score hit for a much more lucrative offer.  A good rule to follow is that unless you are getting over $500 of value, don't open a new credit account.

Store cards might be right for you if you really spend a lot of money at that store. Many times they are tied to rewards programs that give a little extra cash back and special coupons.  But really think before signing up for one. The sales clerk will make you feel foolish for not signing up for one, but remember, he probably gets a bonus when you do. 

Also, store cards are sometimes easier to get approved for, so, if you're just starting out, one could help you build your credit history.  But if you've got a good score already, remember it's worth more than ten dollars.

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