Don't Open a Store Credit Card at Checkout

Never make key life decisions while standing in The Gap.

When we check out from a store, we're often in a uniquely vulnerable position. We're already mentally tallying the total, perhaps second-guessing our purchases, and thinking about the credit card payments to come.

And it's at that moment that we get the spiel for the store's credit card. "You could get a jillion percent off your purchase if you sign up now!"

Well, we think, I would certainly like to get a discount. But because we're now put on the spot, our increasingly impatient fellows stacked up behind us, we don't stop to do the math on what that discount actually works out to be in real terms.

Or whether that likely meager discount is worth the consequences of opening a new card.

Store cards are rarely worth it

The main reason to skip the application? Store credit cards aren't great. A few store cards can be handy for certain shoppers, but on the whole, store cards simply don't compare with regular rewards cards.

There are three main reasons to get a credit card: the rewards, the perks, or the financing. The majority of store credit cards miss the mark on all three.

1. Rewards

You want two things out of a rewards credit card: a sign-up bonus and purchase rewards. In the case of store cards, the sign-up bonus is usually some sort of discount on your first card purchase.

Unless you are making a very significant purchase, that discount is unlikely to save you as much as it may sound at first. For instance, a 20% discount on a $100 purchase is $20. You can easily find cash back credit cards with $150 to $300 sign-up bonuses. Why settle for $20?

And purchase rewards are similar. You can find rewards cards that offer competitive rewards rates for most types of purchases, including most of the brands for which you'd want a store card. In many cases, you can even earn more with another card than you could with the store's own offering.

2. Perks

The perks and benefits you get can be a big driver to get a card. That's what drives most people to seek premium travel rewards cards, after all.

But store cards are not travel rewards cards. However long the list of perks rattled off by the cashier may be, the perks you actually get with most store cards are minimal at best.

Take free shipping. This is a common cardholder perk -- and one offered to nearly everyone else provided they meet some negligible minimum order amount. How often are you paying for shipping now? If the answer is "never," it's not much of a perk.

3. Financing

The words, "No-Interest Financing" can sound magical when you're already wondering how you'll manage your purchase. No payments until I've nearly forgotten I made the purchase? Sounds great!

Until you read the fine print. Unlike the 0% APR intro offers from regular credit cards, store card financing deals typically use deferred interest. With deferred interest, you have to pay off every cent of your purchase before the end of the financing period. If you don't, you'll be stuck paying interest on the entire amount.

Credit card applications have consequences

Even if you know store cards aren't the greatest long term, it can still be tempting to sign up just for the discount, especially if you're making a large purchase. But unless that discount comes out to a very competitive bonus, you still may want to think twice.

You see, signing up for a new store card is exactly the same as getting any other credit card, so far as your credit report is concerned. That means you'll get hit with a hard credit inquiry. Your average account age will dip. You'll even lose a Chase 5/24 slot.

So the real question becomes, is all of that worth it to you?

Checkout isn't the time to decide

No matter how you feel about a particular store credit card, one thing is absolutely certain: Standing at the checkout counter is not the time or place to make an important financial decision.

If the cashier's spiel catches your attention, make a note of the card in your phone so you can check it out later. Take the time to browse the website, read the terms and conditions, and evaluate the contents of the Schumer box. Thus informed, you can make a smarter decision that you're less likely to regret once the rush of the deal wears off.