Rachel Cruze: Evaluating the Pros and Cons of Store Credit Cards
If you’ve ever thought about whether store credit cards are a good idea, personal finance expert Rachel Cruze from Ramsey Solutions has some insights on why they might not be.
You’ve likely been offered a store credit card many times. It seems like every store in the mall offers a discount at the register if you sign up for their card. It can feel like a great idea, especially since you’re already there and about to make a purchase. Why not get a discount?
The main reason to be cautious is that store credit cards usually have much higher interest rates than regular credit cards. Even though the application process for store credit cards is often quicker and approval is easier, the risks often outweigh the benefits.
Store credit cards typically come with very high APRs. According to CNBC, the average store card has a 28.93% APR, and store-only cards charge an average of 30.24% interest, compared to the average interest on a regular credit card, which is 21.19%. So, while it might seem like a great deal to get a discount at the register, you could end up paying a lot in interest if you can’t pay off your balance each month.
There are other reasons why Cruze advises against getting a store credit card. For one, they encourage more spending. Having a store credit card gives you more access to buy things at places you already shop. If you only have to pay the minimum each month, it can tempt you to buy even more. Plus, you’ll likely start receiving coupons in the mail with extra discounts for cardholders, which might make you want to spend when you weren’t planning to.
Cruze also emphasizes the value of delayed gratification. She teaches that “owning is better than owing,” explaining that there’s a significant level of satisfaction you can get from saving up to buy something ahead of time.
In summary, Rachel Cruze is not a fan of credit cards, especially those with high interest rates. She also warns against “buy now, pay later” installment plans that are common in online checkouts. Instead, she encourages people to learn how to budget, save for things ahead of time, and always politely decline when a cashier asks if you want to sign up for a store credit card.