The quick answer is that it depends on the benefits these cards offer you.
the main points
- Having more cards can make it easier to spend more.
- Store cards can affect your balance, but usually not much.
Between gift giving and bumper sales, many people spend far more money on retailers during the holidays than they do the rest of the year. If you’ve done a lot of shopping in person this past holiday season, you’ll probably be tempted to sign up for a store credit card.
A store credit card is a card that you can use with a specific retailer. Oftentimes, these cards come with incentives like reward points on your purchases that can be redeemed against store credit. Many store credit cards offer an initial registration discount.
For example, you may have been offered a 10% discount on your purchase to open a new store card. If you spend $300, that’s a lot of savings. But what if you don’t plan on using your store cards that often? Should I close accounts I opened recently? Ask yourself these two questions to find out the answer.
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1. Do my store credit cards open the door to more spending?
If you’re a disciplined snob and stick to a budget, having a few extra store credit cards might not be such a bad thing. If you use them minimally, or limit yourself to fees that you can easily pay, there is really no harm in keeping these cards. Additionally, by holding on to it, you may be entitled to cardholder privileges. Let’s say you can get 30% off your purchases once every three months – this is a feature you may not want to give up.
2. Can I use a higher credit limit?
One big factor in your credit score is your credit utilization ratio, which measures how much credit you have available that you use. The higher your total credit limit across your credit cards, the easier it is to keep the ratio in a favorable territory. Although store credit cards tend not to come with high spending limits, they do add to your overall limit though. And if you make minimal fees on these cards, it can improve your credit score.
What is the correct call?
Store credit cards have their drawbacks, such as high interest rates. But they also have their perks. If you feel you can benefit by holding on to your new store cards, it can pay off.
However, if you close these cards, it may not hurt your credit score that much, if at all. If you have a high credit limit across your remaining cards, losing the purchasing power of your store cards may not make much difference. Closing long-term credit card accounts can negatively affect your score, but if your cards were opened a month or so ago, this shouldn’t be a problem.
There’s nothing wrong with keeping a few store credit cards in your mix. But if you stick to a card that you expect to use rarely, store it in a safe place. You may be less likely to discover fraudulent activity on credit cards that you don’t use, but you can reduce this risk by keeping them safe until you need them.
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