Should You Open a Store Credit Card on Black Friday?

Opening Store Credit Cards While Black Friday shoppingAnyone who plans to get caught up in the Black Friday shopping madness this year can expect to be asked (perhaps more than once) whether they'd like to open a store credit card. Typically, store credit cards can be terribly tempting, with promises of discounts of 10% to 15% on the first purchase and other bonuses. But, on Black Friday, the savings seduction is even more irresistable.

Retailers may bump up the initial savings offer or sweeten the deal in other ways, says John Ulzheimer, founder of "You're going to be hit up very aggressively for in-store retail cards, and we're even seeing 20% off in some places," he says. However, Ulzheimer adds, "It's a very enticing offer, but the downside is pretty significant."

In other words, when it comes to opening a store card, shoppers inevitably pay a hefty price for discount at checkout.

Sometimes, the rewards aren't just monetary. Mandi Pritchard of Tulsa, Okla. (pictured below) opened a Kohl's credit card last year after standing in line for an hour waiting to check out.

Mandi Pritchard opened a store credit card on Black Friday"Even though we had already waited in line for an hour... we had barely moved up in the line," she recalls. So when a store employee offered line-skipping privileges to anyone who wanted to sign up for a credit card, Pritchard jumped at the chance. She says the 10% off her roughly $500 bill was nice, but bypassing the line was the biggest perk. "I'm sure we will hit Kohl's again this Black Friday," she says. "To skip the lines this year, my mom will open a card."

While skipping a few spots in line may have saved Pritchard some time, it didn't do wonders for her credit score. Just applying for a store card delivers a hit to a credit score; each application or "inquiry" drags it down a bit further. So if your plan to save big this holiday season is to make your way through the mall, opening up cards at each place you shop, this could have a serious negative effect on your credit. Even worse, those inquiries stay on your credit report for two years, says Ulzheimer.

In other words, open a couple of store cards this Black Friday and come next summer, when you want to refinance your house or finance a new car, that $20 or even $50 you saved when you opened the card is going to look like a pittance compared to the hundreds or even thousands of dollars you could lose when you have to pay a higher interest rate on your loan because your credit score was just a little too low to qualify for a better rate.

"Credit scoring models don't give you a grace period," Ulzheimer says. The issuers of your current cards pull your credit every month. If they see a drop in your score and a slew of new store cards opening, that could be enough of a red flag for them to lower your credit limits, which would further depress your score and set you on a downward spiral.

If that isn't enough to deter shoppers from opening a store card, then just take a look at the interest rates the cards charge. U.S. Rep. Anthony Weiner of New York recently published a study warning consumers about the high APRs retail cards charge. The research found that the average APR on retail cards is 23.83% -- and some rates are as high as 28.99%. Even if you get 15% off to open the card, a single month's worth of interest charges on a revolving balance will not only eat up that discount, but leave you "upside down" to boot.

"So what?" you may think. Maybe you plan to pay off the balance immediately. If so, good for you -- but there's yet another hidden cost. Even if you have good credit, store cards have low credit limits so even if you make a moderate purchase, your account will be close to maxed out, dragging down your credit score.

Plus, Peter Dunn, author of 60 Days to Change, says card issuers know many cardholders plan on closing their accounts after they get the initial discount. As a result, they'll target you with follow-up offers, coupons and deals. So while you're thinking of how much you'll save, their plan -- to get you to spend and pay that lofty APR -- is working.

Say you still decide to open the card, pay off the bill and then cancel it to avoid future temptation. Unfortunately, closing the account will also ding your score because you've just cut the total credit available to you down.

No matter how you look at it store credit cards are a losing proposition but relying on them to do your Black Friday shopping is an even slippier slope. What if you reach the counter with all your kid's presents hoping to get 20% off the whole lot, then don't get approved? Do you bust your budget to afford the toys or put them back on the shelf? Instead of taking that gamble, a better alternative would be to search in stores and online for the best prices ahead of Black Friday rather than rely on a discount you may or may not get. Plus, do you really want the rest of your Black Friday shopping experience to be tarnished by the worry that something has gone haywire with your credit score?

When Jody Steinberg applied for a store credit card at a now-defunct department store near her home in Atlanta a few years ago, she had forgotten that she'd put a freeze on her credit earlier to prevent fraud. The only problem was, it kept her from getting credit, too. Until she figured out what was going on, Steinberg says it was a source of stress. "I left the products in the store," she says. "I can justify it if I use all the coupons and the great deals, but it wasn't worth it without the discount."

Gerri Detweiler, personal finance expert at, says the best way to safeguard your credit this Black Friday is to do your budgeting and deal research before you hit the stores so you're not swayed by a spur-of-the-moment opportunity. If you do plan to charge, know your current credit limits and stick to the cards you already have.

The bottom line is that while an extra discount -- or a chance to move to the front of the line -- may seem tempting, it's generally not worth the long-term damage opening store credit cards (especially multiple ones) has on your credit score. "That's not a game people should be willing to play," says Dunn.

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