Finance Guru Ramit Sethi Warns to Avoid This Type of Credit Card With 'Awful Terms'

Most people don't apply for new credit cards too often. It's normally something consumers do once a year, max, except for those who really like using multiple cards. And if you don't apply for new cards much, it's all the more important to choose wisely when you do. Because some cards have much more to offer than others.

Unfortunately, one type of credit card you probably get offered all the time can also be one of the worst choices. It's those store credit cards, also known as retail credit cards, that practically every store seems to offer during the checkout process.

Ramit Sethi, host of How to Get Rich on Netflix, recently warned against getting these cards. He said "AVOID retail credit cards -- they have awful terms and end up costing you more money." Here's why you should follow his advice.

Why you should stay far away from store credit cards

If you don't shop around for credit cards too much, store cards may look like a good deal. Apply today, and get 20% off your purchase! Earn rewards to redeem for gift cards. And many store cards also advertise zero-interest offers.

These are all decent benefits. However, you could get much more valuable benefits from quality credit cards not tied to a store.

For example, lots of store credit cards entice shoppers with an instant discount of 10% to 20%. Everyone loves discounts, but how much is that actually going to be worth? If you spend $200, a 20% discount saves you $40. To put this in perspective, some regular credit cards offer sign-up bonuses worth $200 or more.

Store cards also usually earn rewards that are redeemable in stores. The problem is that you can only use these rewards when you want to buy something. If you have a cash back card, you can redeem your cash back anytime and save yourself money. Store rewards are only useful when you have something to buy at that store.

The other common perk you see with store credit cards is special financing offers. These are almost always deferred interest offers. What that means is you pay no interest if you pay the full balance within the specified time period (often six months). But if you don't pay in full, you can be charged all the interest dating back to when you made the purchase.

Which type of credit card should you get instead?

If you're interested in a store credit card because you want to earn rewards, check out rewards credit cards not tied to stores instead. To be specific, here are the two types of rewards cards to look at:

• Cash back credit cards
• Travel credit cards

These rewards cards are more versatile than store cards, and it's much easier to use their rewards to save yourself money. Cash back is as easy as it gets, as you can put it toward your credit card bill or deposit it to your bank account. Travel rewards are a little more complicated, but if you like to travel they can save you a lot of money on your trips.

If you were planning to get a store card because of a special financing offer, look into 0% APR credit cards. They charge a 0% APR for an intro period, which is 12 months or longer with some of these cards. And unlike store cards, 0% APR cards offer waived interest instead of deferred interest. If you don't pay off everything by the end of the intro period, you're only charged interest on your remaining balance going forward. There's no risk of getting hit with a big bill after the intro period like there is with deferred interest offers.

There are a small number of store credit cards that can be useful for frequent shoppers. However, in most cases, a non-store card will be a better option. That's why it's always a good idea to compare credit cards before you apply for one. By checking out multiple cards and not just going with the first offer you see, you can make sure you're picking the one that will save you the most money and works best with your lifestyle.