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Credit cards from retail stores: Know the score

Pressure and temptation. It’s Saturday afternoon.

Pressure and temptation. It’s Saturday afternoon. The lineup at the department store checkout is long enough to make you think you’re waiting for tickets to a hot rock concert.

Clutching your sale scores — a coffee maker, a set of towels and a pasta machine (you’ll save pennies making penne yourself, right?) — you’re easy pickings for the clerk.

He chirps, “Will that be on your (insert store name) card?” When you say no, he looks at you sadly. “Do you have a (insert store name) card?” At your head shake, the clerk’s sad look becomes mournful.

Now comes the tempting pitch and the pressure to decide as a lengthening lineup snakes down the aisle behind you. You could save 10 per cent on your purchases, on top of the 30 per cent sale price. It just takes a minute and can be done right here at the check-out counter.

The implication is that you’d be a fool not to take advantage of this “one-time offer.” It’s not like you ever have to use the card again.

Hold on a minute. These point-of-sale credit card pitches are incredibly tempting since they offer a quick financial bonus. But take care that you don’t ding your credit score for
the sake of saving $50.

Every time you acquire a new credit card you increase the total credit available to you which means you pose a higher risk to lenders.

Most people who apply for a retail card while making a purchase don’t even know what the credit limit will be. You could be signing up for $10,000 in new credit which might have a negative impact on your score.

A lowered credit score means that the next time you need to re-mortgage, buy a car or take out a line of credit, you might have a difficult time getting approved.

Alison’s Money Rule:

Retail cards can offer a quick financial bonus but take care you don’t ding your credit score when you apply.

– Alison Griffiths is a financial journalist, author and host of Maxed Out on the W Network. Write to her at alison@alisongriffiths.ca.

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