Question from a novice: It seems like every store in existence these days wants you to get a store-specific charge card to unlock special discounts and what-not. But is it damaging my credit score in the long run if I sign up for a lot of those deals? And if so, to what extent? I mean, is the credit risk small enough to justify the special deals and discounts? Also, if I were to sign up for such a card, is it better to use the card sparingly? Or ... what do you recommend? Thanks!
A portion of your credit score is dependent upon Average Age of Accounts. This means the total months of history of all your accounts divided by total accounts. This is then translated into years. Opening new accounts frequently will lower your average age. Additionally the inquiries required to obtain the accounts will affect your credit score for one year and remain on your reports for two years.
If there are a few stores that you frequent regularly then having a credit account with them can be a good idea as you will take advantage of the special offers that they provide to their credit customers. But due to the high interest rates on most of these cards you will want to pay the balance off in the earliest time frame to eliminate or reduce interest charges that will wipe out any incentives you may have received.
IMHO to just apply for every card that is offered to you is not a good idea for most consumers who are attempting to maintain a responsible credit profile. And I know I will probably hear from one (or more) people in these forums who have a gazillion credit accounts and handle them with ease. I'm not that capable and I like to keep my life simple. I would hate to make a charge and then forget the payment because it is not a store I go to often or an account I look at on a regular basis.
Over the course of time I have applied ofr three store cards.. I have seven credit cards total.. My stroe cards are JC Penney Lowes and Target. Lowes and Target give a 5% discount on the purchase which is taken off at the cash register when you use the card to pay for the purchase. JC Penney also offers discounts as well. I pay all my credit cards off in full each month I never use their special financing offers either.. That said there is nothing in FICO score formula that dings your score because it is a store card. You manage your store card just like any other credit card.
Question from a novice: It seems like every store in existence these days wants you to get a store-specific charge card to unlock special discounts and what-not.
Store charge cards are unusal. Most are credit cards.
But is it damaging my credit score in the long run if I sign up for a lot of those deals? And if so, to what extent?
Definitely read up on credit scoring. AAoA is mentioned above and adding new accounts (not just store cards but any accounts) will drop your AAoA every time you add a new account. You can do the math to determine the impact of a new account on your AAoA before you apply to aid in your decision making. Some sites (such as Credit Karma) also offer tools to calcuate the impact if you don't want to do it manually. Also consider that hard pulls, while the effects drop off relatively quickly, also negatively impact your score.
To what extent varies. Everyone's credit isn't identical. Two people can apply for and get approved for the same credit cards with the same limits (granted this is unlikely and more of just an illustrative example) and have different impacts. Generally, a thicker credit file will have less of an impact than a thinner credit file. Again, this is general credit info and not specific to just store cards.
I mean, is the credit risk small enough to justify the special deals and discounts?
Only you can answer that question. Justify is always a highly subjective matter. I don't have any store cards because they're not justified to me. Some have one or a few store cards. Some have many store cards. You need to do what works for you and take into account not just the intro and special offers but every aspect of every card you're considering. As mentioned above, many have higher interest rates as an example.
As a rule of thumb, if you know you're going to use a store card a lot then it may be justified. Chasing the offers probably isn't a good idea especially if you don't have a thick credit file that can absorb the new accounts and inquiries without much effect.
Also, if I were to sign up for such a card, is it better to use the card sparingly?
Define "better". It's another highly subjective word and you can't just assume that your meaning is the same as everyone else's. If you mean from a scoring perspective then all that really matters is maintaining reported utilization (balance/limit). Again, reading up on credit scoring will give you a better understanding of how things affect your score. One can use any card as much one wants and maintain reported utilization by paying before statement close . That said, that apporach isn't for everyone. For some, managing spending or even sock drawering the card is a better and/or safer approach.
Or ... what do you recommend?
I'd recommend starting here: