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Credit Cards: Steer Clear of Store Cards

Buying a bra shouldn't be torturous. But if you were me at the local Victoria's Secret in Lower Manhattan a few months ago, you would have wanted to run out screaming. And not for the store's lack of push-up selection; rather, it was all thanks to a pushy sales lady who kept insisting (and insisting) that I should open up a store credit card.

Here's how it went down:

Me: Hi.

VS Sales Rep: Would you like to save 10% today by opening a Victoria's Secret Angel Card?

Me: Is that a membership rewards card or an actual credit card?

VS: It's a store credit card. It only takes 5 minutes to get approved.

Me: No thanks.

VS: You get a surprise birthday gift every year ...

Me: That's OK.

VS: Free beauty samples and makeovers ...

Me: Uhhmmmm.

VS SR: Early access to sales...

Me: (Inner voice) Seriously? Now I know why this line is taking so long! (Out loud) No.

VS: It's a really good deal.

Me: (Infuriated) Actually, it's not. For what it's worth - I'm a personal finance writer and I'm no fan of store credit cards. They're not that great.

Awkward silence.

VS: (Out loud) Alright. (Inner voice) Whatever, eye roll.

I get it - store credit cards offer fabulous perks, namely that irresistible discount on your first purchase. (Although this 10% off deal was actually pretty wimpy compared to others I've been offered.) Unless you are a pro at paying off your credit card in full each month and are an avid shopper at that particular store - enough so that you can reap all the benefits - I think you're better off simply passing.

Had the Victoria's Secret sales rep been interested (and if there weren't six frustrated customers behind me), here's what I would have gone on to say about store credit cards and my misgivings.

High Interest Rates

The average interest rate on a regular credit card issued by a bank these days is around 14%. But the average rate on a store credit card is typically 20% or higher. Miss a payment and it will climb way higher. If you're not already in the habit of paying off your credit card balances in full each month, this interest rate can easily wipe out any discounts you may have earned initially.

Low Credit Limits
When I (mistakenly) opened a Pier 1 credit card in 2005, it had a $1,500 credit line. That's much lower than most bank-issued cards. Even my first credit card, at age 19 (when I had no credit history), had a starting limit of $5,000. In general, for the sake of your credit score, the higher the credit line, the better. Otherwise, with a low limit, you can more easily max out the card, which can negatively impact your credit score. With the Pier 1 card, I think I bought a shelf, a coffee table and some dishes - and was already more than halfway to my credit limit.

More Pressure to Spend
Had I opted for the Victoria's Secret card I would have been targeted with promotions, deals, and sales. Like the rep pointed out, I'd get free makeovers and early access to sales. But those are all designed to get shoppers to spend more, and more often. They are no good for the easily tempted shopper's bottom line.

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