Rachel Cruze: Is Having a Store Credit Card a Good Idea?
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Catherine Collins
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Nicholas Morine
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If you’ve ever wondered if store credit cards are a good idea, Rachel Cruze, a personal finance expert at Ramsey Solutions, explained why they’re not.
You’ve probably been offered a store credit card numerous times in your life. It seems like every store in the mall offers a discount at the register if you sign up for their store credit card. As Cruze explained, it can feel like a great idea, especially because you’re already there about to buy something. Why not get a discount?
Well, the main reason is that store credit cards usually have much higher interest rates than regular credit cards. Even though store credit cards usually have a quicker application and it’s easier to get approved, the risks outweigh the benefits.
Store Credit Cards Hold Very High APR
CNBC recently reported that the average store card has a 28.93% APR, store-only cards charge an average of 30.24% interest, but the average interest on a credit card is 21.19%. So, even though it might seem like a great deal to get a big discount at the register, you could be on the hook for paying a significant amount of interest if you’re unable to make your monthly payment.
Here are some other reasons why Cruze said getting a store credit card is not a good idea.
Store Credit Cards Encourage Spending
Having a store credit card gives you more access to buy things at places you already shop. If you have a credit card where you only have to pay the minimum, it can make you want to buy even more.
You’ll also likely start getting coupons in the mail with extra discounts for cardholders. Again, this might make you want to spend when you weren’t planning to.
Delayed Gratification Is Satisfying When Learned
Rachel Cruze teaches that “owning is better than owing.” She explained that there’s a big level of satisfaction you can get from saving up to buy something ahead of time.
In sum, Rachel Cruze is not a fan of credit cards at all, especially not ones that carry such high interest rates. She also warns against “buy now, pay later” installment plans which you can now see all over online checkouts.
Instead, she encourages people to learn how to budget, save for things ahead of time, and to always politely say “no” whenever a cashier asks if you want to sign up for a store credit card.
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