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“Do you want to save 10% on your purchase today?”

Whenever you hear this greeting from a store cashier, you know it really means, “Do you want to open a store credit card?” Before you answer that question, here are several things to consider:

Opening a new credit card puts a hard inquiry on your credit report. The credit reporting agencies look at hard inquiries unfavorably and immediately dock your credit score. How much your credit score is docked depends on your overall credit history, how higher your credit score is and how many inquiries you have on our report. In general, the more inquiries you have, the more your credit score will be penalized per inquiry. According to, “people with six inquiries or more on their credit reports can be up to eight times more likely to declare bankruptcy than people with no inquiries on their reports.”

Store charge cards typically have high interest rates. Before filling out a store credit card application, check the interest rate. Private-label cards or store cards that can only be used at one store, typical charge a flat interest rate of around 20%, regardless of your credit rating. If you don’t pay off the balance quickly enough, the finance charges on the card can offset the upfront savings you got from opening the account.

Most store credit cards have low limits. Many store charge cards will only offer a few thousand dollars worth of credit or less. On one hand, this can keep you from running up a super high balance, but on the other, it can negatively affect your credit. Carrying a balance of more than 30% of your available credit on one card can pull your credit score down. For example, if you only have a $1,000 credit limit on a card, carrying a balance of more than $300 can hurt your credit rating.

Having a store credit card may make you spend more in that store. This is one of the main reason stores offer private-label credit cards. They know that consumers will often say, “Oh, I’ll shop at Banana Republic because I have a charge card there,” or something to that effect. Having open credit at a store often makes consumers tempted to use it whether or not they can afford to.

However, opening store credit cards do have some benefits. First, you do get that initial discount, which can be 10 to 20% depending on the store. If you are making a large purchase like a flat screen television, that can translate into hundreds of dollars. Additionally, applying for a store credit card may often enroll you in a preferred customer program that can qualify you for ongoing discounts. Store card issuers also have notoriously low lending standards, so these cards can help those with low credit scores build better credit by using them responsibly.

If you frequent a particular store and can get a lot of mileage from promotional discounts without overspending, getting a store credit card may not be a bad idea. It’s best, however, to pay off your balances each month to avoid high finance charges. And avoid opening new store charge cards if you need to maximize your credit rating to qualify for a big loan like a mortgage.

—For the best rates on loans, bank accounts and credit cards, enter your ZIP code at