Dave Ramsey says there are 4 big reasons to avoid store cards

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Do not open a store credit card without reading this.


Key points

  • Store credit cards are offered by many places you shop.
  • Dave Ramsey says these cards should be avoided.
  • There are four main reasons Ramsey says you shouldn’t open a store card, including accidental overspending and high interest rates.

Chances are that at some point in your life you have been offered the opportunity to open a store credit card. This happens when you visit a store and proceed to checkout and the cashier offers you the opportunity to save on your purchase if you apply.

Unlike regular credit cards, store cards can only be used at the store that issues them. While it might seem like a good idea to open one in order to realize the savings suggested by the cashier, finance expert Dave Ramsey actually explains why you should just say no. In fact, there are four big reasons why Ramsey doesn’t think you should open a store card. Here is what he says.

1. Your card could entice you to spend more

Ramsey’s first big argument against store cards is that signing up for a card will make you spend more and buy things you wouldn’t otherwise be interested in.

“When you’re at the checkout and you’re asked to sign up, you’re thinking about saving on something you’re about to buy anyway,” Ramsey said. “But the very next email in your inbox will be an offer on something you didn’t intend to buy.”

Ramsey explained that companies can afford to give you the deal upfront to entice you to open a store card because they know you’ll end up spending more as a cardholder. And, he’s absolutely right about that. In fact, in many cases, the “rewards” you get as a store card member require you to spend more money to use them.

This is different from a regular credit card which may offer rewards such as cash back that won’t require you to spend extra money just to redeem them.

2. Your interest charges will be high

Ramsey’s second warning concerns the astronomical interest rates that come with most store cards. Ramsey explained, correctly, that the interest rate on store cards is usually much higher than the rate on regular cards (which is already quite high to begin with).

“If you’re even a month late, you’ll be paying way too much for those boots you bought ‘discounted’ with your card,” Ramsey warned.

3. You better save up and pay cash

His third argument against signing up for a store card is that “better to have than to have”. This is one of Ramsey’s most common phrases. He strongly believes that it’s better to just pay cash for the items you want to buy rather than paying for them slowly over time and committing future income to the things you buy today.

While Ramsey is right about not wanting to pay interest on purchases, he’s not necessarily right that your best option is always to pay cash. You want to save for items, but using an out-of-store credit card with generous rewards and paying it off in full might be a better way to shop.

If you have money in the bank to cover your purchase, why not load it onto a card that gives you cash back or miles for free travel, then simply pay your bill before you owe interest?

4. Cardholder Benefits Are Not Worth It

Finally, Ramsey’s fourth argument in the case against store cards is that the benefits of having a card are not worth it.

“They’re going to give you special discounts and cardholder offers, but not because they’re trying to say thank you for shopping at their store. They’re literally betting on every impulse purchase you make because they’re going to offer a deal,” he said.

Since cardholder benefits on store cards tend to be much more limited than the benefits you can get with a regular card, he’s probably right.

You should avoid store cards and, if you can be responsible with your credit, find a general-purpose card that you can use anywhere that offers much more valuable rewards that you’ll actually enjoy – without having to spend more. to get them.

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