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U R @: Education Center : Store Credit Cards : Should you Apply for a Store Credit Card?
SHOULD YOU APPLY FOR A STORE CREDIT CARD?
Thinking about applying for a store credit card. There are many tempting offers. Apply for a Gap credit card and get special discounts. Apply for a Home Depot credit card and make no payments. The offers all seem very attractive. But they don’t look so great when you read the fine print. Why? Because store credit cards charge interest rates that are often double that of regular credit cards.
As many have experienced, getting offered a store credit card is now a part of the checkout process. Cashiers regularly ask if you’d like to save 10% or more on your purchase by signing up for a store card. It really sounds like a good deal. And, if paid in full immediately, these discounts are a good deal.
The real problem with store credit cards lay in the fact that when they offer you 10% off at the register, they’re expecting to earn 22%, 26%, or even more in interest charges. Typical, non-store credit cards currently charge a fraction of the interest charged by those issued by stores.
For example, many low interest credit cards offer interest rates of 10.99%. Having one of these credit cards could save you close to $100 in interest on a $1000 purchase over the course of one year. However, if you apply for a new credit card that offers a similar rate and a 0% interest rate for 1 year, you would save close to $200 in interest. If you took longer to pay that balance off, the savings could amount to $500 or more. That's a much better deal than 10% off.
In some instances, such as with a Macy’s or other department store credit card, the initial savings can be as much as 30%. When buying a $2500 diamond necklace, that amounts to a very substantial savings of $750. But it still leaves a balance of $1750 on your credit card. Over a year, that would cost you over $300 in interest, eating up almost half your savings. If you can’t or prefer not to pay that balance in full, a regular credit card can again come to the rescue. How? With a 0% balance transfer.
Most balance transfer credit cards offer 0% interest rates on balance transfers for 1 year. Thus, instead of paying over $300 in interest on your diamond necklace, you would pay $0 in interest the first year, and 50% less interest until the necklace is paid off.
Taking into consideration the standard 3% fee charged for balance transfers, which in this case would total $52, you could save the full $750 on the necklace, plus $250 on interest during the first year. In other words, a thousand dollars!
SmartCreditChoices.com features information and applications to nearly 100 credit cards. Here, you can view low interest 0% credit card offers or view balance transfer credit card offers and apply online for approval.
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