In-store credit card promotions are common during the holiday season, when shoppers are choosing their holiday gifts.
Retailers like Macy’s, Target and Lowe’s will offer discounts of up to 20 percent if you apply for a store credit card on the spot.
As holiday bills pile up, saving $100 may seem like a tempting offer, but there are factors to consider before signing on the dotted line.
Store credit cards may not be the best deal out there and may even hurt your credit score. according to The Points Guy blog.
Store credit cards can lower that all-important credit score because they often have a small credit limit.
Store credit cards often drive promotions during the holiday shopping season
Credit scores are important because banks use them to assess creditworthiness when considering whether to give you a car loan, home mortgage, or credit card.
Credit compilers like to see that individual transactions on a credit card are below 10 percent of the card’s limit.
The lower the credit limit, the closer an in-store purchase is to exceeding it.
For example, if the purchase you are making is $1,000 and the credit limit on the card is $3,000, then your utilization rate would be 33 percent.
It’s also recommended to keep your total credit usage on all your cards below 30 percent, according to FICO.
If store credit cards are low compared to those offered by banks or other major lenders, this could also be a factor in increasing that usage.
Instead of using store credit cards, The Points Guy recommends using shopping portals like Rakutan, Mr Rebates and TopCashback and rewards credit cards that offer rewards and discounts. This can often lead to greater savings.
“Online shopping portals offer an easy way to earn tons of bonus miles, points or cash back at many popular retailers,” the site explained.
Rakutan is offering 15 percent cash back at popular retailers during Black Friday and Cyber Monday, according to the post.
Most airlines, hotels and banks have their own shopping portals that help you earn rewards when shopping online.
The Points Guy also recommends using a rewards credit card like those offered by American Express.
“Specific offers include offers like 20,000 bonus points if you reach a certain purchase dollar amount, 10 percent discounts at popular retailers, or statement credits of more than $100 when you shop at specific merchants,” the post explains. .
Credit card experts suggest using rewards cards and shopping portals instead of store credit cards.
Amex is the most popular card provider in the US, but it is not accepted in all countries.
In August, eBay stopped allowing customers to use American Express cards.
The online marketplace blamed “unacceptably high fees” imposed by Amex for processing transactions.
eBay isn’t the only company to let AmEx down on its fees to retailers, which can be as high as 4 percent.
Retail giant Costco also walked away from the card company nearly a decade ago. Smaller restaurant chains have also stopped using the payment processor.