4 in 10 Shoppers Might Open a Store Credit Card During the Holidays. Should You?

It's a decision that might serve you well -- or one you might regret.

The holiday season is a popular time to shop. And this year, you may be eager to start your shopping early, especially since a number of retailers are running promotions ahead of the holidays.

Now, in the course of your shopping, you may be asked if you want to open a store credit card. Unlike regular credit cards, store credit cards can only be used at the retailers that issue them. 

In a recent Bluedot survey on holiday shopping, 40% of respondents said they might open a store credit card this season. But is that a smart move for you?

The upside of store credit cards

With a store credit card, you might get approved within minutes of submitting an application. That's convenient.

Plus, you can often snag a nice discount on your initial purchase when you open that sort of card. Some offers, for example, might be as high as 25% or 30% off of your opening purchase. So if you're checking out a $200 holiday gift haul and snag a 30% discount, that's a cool $60 in savings.

What’s more, store credit cards often make it easy to rack up reward points you can redeem for store purchases, or money off of those purchases. So if there's a retailer you shop at a lot, then a store credit card could make sense. 

The downside of store credit cards

Store credit cards may have their perks. But one downside is that they tend to charge higher-than-average interest rates on balances that are carried forward.

To be clear, that's a pretty big drawback. Many people rack up higher credit card tabs during the holidays. But if you run up a balance on a store credit card that you can't pay off right away, it might end up costing you a lot more than anticipated -- so much more that you negate the discount you snag on your initial purchase.

And remember, if your store credit card balance gets too expensive to keep up with and you fall behind, you'll risk damaging your credit score. That could make it harder to borrow money in general.

Plus, any time you apply for a credit card (store or otherwise), you have a hard inquiry done on your credit report. Granted, a single hard inquiry isn't a huge deal if your credit score is solid. But if you've recently applied for other credit cards, an additional hard inquiry could impact your credit score a lot more. And that's a bad thing if you have plans to apply for a larger loan in the near term, like a mortgage.

What's the right call?

You may be tempted to open a store credit card during the holidays, and in some cases, doing so could make sense. But before you go that route, make absolutely certain to read the fine print. In addition to getting stuck with a higher interest rate, you may find that the perks your card offers are limited beyond your initial discount. And if that's the case, it could make a lot more sense to apply for a new credit card that offers a generous sign-up bonus and rewards program across the board.