Opening Credit Cards to Qualify for a Promotional Offer

Retail stores always have promotional offers and it is great when you’re getting the item that you need for a great deal. However, did you know that taking advantage of a promotional offer to get a discount on a store purchase may save you a couple of bucks that day, but in the long run if you are not careful it could hurt your credit score?

Whenever consumers apply for new credit cards, such as those that are associated with promotional offers, their information has to be verified. The verification process is an electronic transmission of your personal information, and every time it is conducted your credit score decreases a few points. That may not seem like a big deal at the present moment. However, if you are planning on applying for a big loan, your low credit scores could make your interest rate catapult higher and will make the money you saved by qualifying for a promotional offer appear like chump change.

Another factor affecting your credit score is your credit utilization ratio. That equation includes all the credit you are currently utilizing versus the total credit amount that is available to you. So by having a low ratio you can keep a healthy credit score. However, with a store credit card – the credit line is low, thus decreasing your credit utilization ratio because the difference of your purchase and your credit line for that card is almost equivalent; which is typical of the credit cards opened to qualify for a promotion.

Finally store credit cards typically carry higher interest rates than national credit cards, so you may quickly amass a debt far higher than the promotional amount you saved on your original purchase if you are not responsible with your payments.

With all that said, opening a store credit card to take advantage of a promotional offer is still good – only if you are responsible with your payments and spending habits. Store credit cards are a great way to show your loyalty to a brand and earn additional promotional offers, coupons, and sales invitations. As long as you know both the pros and cons of opening a credit card to take advantage of a promotional rate you can make the best educated decisions for yourself.