Does Getting A Store Credit Card Do Help Or Harm?

Anyone who has gone through a department store checkout line knows what it's like to be solicited for a credit card

. As we stand dutifully at the counter waiting for the cashier to ring up our purchase, we listen to a pre-rehearsed spiel about getting instant savings and future promotions. Even though the immediate gratification of keeping some of our money seems to add up in our mind as a good deal, exactly how much does it cost us in the long run?

The greatest advantage of getting a store credit card is probably that initial 10%-20% percent off you receive when you apply and are approved. But if you don't pay off your balance when you receive the statement, you will most likely end up losing that savings by way of paying interest.

You will inevitably receive coupons and store promotions via email or standard mail you may find yourself spending money to save money. If you shop at that particular store often, you could save money over the long term, if you pay off your purchases in a timely manner.

If you are looking for an opportunity to build your credit and boost your score higher, than this can be one way to do it. If for some reason you can't make the payments on time your credit score will be negatively affected. You may jeopardize your credit rating by having too much open credit with a high balance. This will ultimately affect your DTI (debt to income ratio) and cost your credit score in the long run.

So what to do if you really want to reap the "on the spot" benefits of opening that credit card but don't want to delve into a potential credit conundrum? Follow a few simple guidelines:

*Pay off your balance in full each month to keep from paying interest fees.

*Make sure you make at least the minimum payment every month as to not hurt your credit score.

*Keep the balance of your credit card at 30% or less of your credit limit.

*Don't cave into the temptation to purchase something you don't really want or need just because you received a coupon or promotion.

*If you need to use credit to make a purchase, consider a universal credit card. The interest rate will be lower.

Bottom line: be smart about your spending. If you don't have the cash to pay off your credit card balance, reconsider your purchases. If you are thinking about using a credit card for something that just can't wait, consider taking out a payday or cash advance loan. These are short-term loans that can be paid back with your next paycheck. You won't have a long-term balance like a traditional credit card and once the money is paid back, you don't have to worry anymore.

by: Melissa Daley

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