When a Store Line of Credit is a Bad Idea

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It’s hard to resist a discount offered to you upon checking out at the store - but you only qualify if you open a new line of credit; there are some occasions when this isn’t a bad idea, however, the following list lays out the details of when you should avoid it:

  1. Like the saying goes, “if you can’t afford to buy it with cash, you definitely can’t afford to buy it on credit.” You should always try to use cash or your debit card when making a purchase. When you buy items on credit, you are paying interest which means it costs more than the ticket price in the long run, and sometimes that means paying more than it is worth. Unless you really need something, it’s best to wait until your financial situation allows you to buy the item outright.

  2. If you can get a better financing option and lower interest rate with a standard credit card, then it’s best to choose that, which will save you in the long run versus getting a discount. While it’s always smart to buy it with cash or your debit card, if you absolutely must finance the item, seeking out a deal with zero-percent interest is your best bet.

  3. If you have a credit card for almost every store under the sun, and you are thinking “what’s one more?” Walk away from the counter! Putting yourself further into debt isn’t good for your finances or your credit score. Constantly being stuck in a cycle of paying off credit cards could make it more difficult for you to achieve financial freedom. What’s more, every time you apply for a new credit card, including the one’s you’ve opened in the past two years, there will be an inquiry placed onto your credit report, which in turn dings your credit score.

  4. Store lines of credit seem like a great deal in the heat of the moment - though you must ask yourself “is the discount worth it when the interest rate is high?” Never. So unless the store is offering you very low interest with the new card, you should just pay full price and look for a coupon for next time. Stores expect most consumers to be unaware of the card’s interest rate, which is good for them, but bad for you.