Student Credit Card and Credit Education Blog

You know the feeling. Your buying a pair of pants at Gap and the checkout person asks, “Would you like to sign up for a Gap credit card? You’ll save 20%!” It sounds like a great deal - 20% off right then and there! Why not?

Well, there are a few reasons why you might want to think two or three times about signing up:

• Opening new cards = lower credit score - Fact: the more cards and available credit you’ve got, the lower your credit score will be. If you’re planning a car, TV, or home purchase in the next 6 months, your rates for financing might be a bit higher if your credit score is lower.
• Store card APRs are generally higher - If you aren’t one to always pay back your balances, then the interest you pay on these cards will most likely be more than what you pay from Visa and Mastercard. Double check the card’s APR if you plan on frequently charging.
• How often do you shop there? - Unless you plan on being a regular, the chance of forgetting to pay your balance or cancel the card may offset that introductory discount you receive.
• Is the discount worth it? - Keep in mind that this hefty discount will only be for the initial purchase. Afterwards, you may get occasional coupons based on your spending, but nothing like that first discount. If you plan on signing up, make the first purchase a fairly hefty one.

Unless I’m making a big purchase, I usually skip these. The time it takes to complete the application as well as the hassle of remembering to cancel the card after I pay off the balance usually makes the card a poor value for me. That said, 20% off a $300 purchase - particularly around the holidays - is a nice bonus!