During the holiday season, it’s easy to get carried away spending more money than you otherwise would on gifts, experiences, and big-ticket items. There’s something about holiday decorations and colorful ads that make us want to pull our credit cards out and spend away. But, just like with those decorations and advertisements, don’t fall victim to “deals” that might sound good in the moment but come back to haunt you in the new year.
Store credit cards are one of those “sounds good in the moment” kind of offers that are often too good to be true. Store credit cards lure customers in with promises of a significant discount on an initial purchase, which can be significant if you are making a big purchase such as a TV, but along with a significant discount comes an even bigger interest rate if you do not pay your statement in full. Stores are not in the business of losing money, so they are willing to give a discount knowing that most people will not pay their bill in its entirety and will end up paying the 20 percent (or higher) interest rate for many months to come. Opening a new credit card can also affect your credit score so that store credit card with a discount off your first purchase could hinder your ability to get a loan for perhaps a new car in the coming year.
Also, beware of the “buy now, pay later” sales pitch. There is really no deal here; just the option to delay paying for your item. However, like a credit card, if you miss a payment, you will incur fees and damage your credit score. If you cannot afford to pay for your item, you may want to rethink your decision to purchase the item at all.