Should you cancel store credit cards you opened during the holidays?
The quick answer is that it depends on the benefits these cards give you.
- Having more cards can make it easier for you to spend.
- Store cards can affect your credit, but usually not much.
Between freebies and sales galore, many people spend significantly more money at retailers during the holidays compared to the rest of the year. If you’ve been doing a lot of in-person shopping over the past holiday season, you may have been tempted to sign up for a store credit card.
A store credit card is a card that you can use at a specific retailer. Often these cards come with incentives such as rewards points on your purchases that can be redeemed for store credit. And many store credit cards offer an upfront discount for signing up.
For example, you may have received 10% off your purchase for opening a new store card. If you spend $300, that’s a lot of savings. But what if you don’t plan to use your store cards often? Should you close accounts you recently opened? Ask yourself these two questions to find out.
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1. Do my store credit cards open the door to more spending?
If you’re a disciplined spender who sticks to a budget, having a few extra store credit cards might not be a bad thing. If you’re using them minimally or sticking to a fee you can easily repay, there’s really no harm in keeping these cards handy. Plus, by keeping them, you may be eligible for cardholder benefits. Suppose you can get 30% off your purchases once a quarter; it’s a perk you might not want to give up.
2. Can I use the higher credit limit?
An important factor in your credit score is your credit utilization rate, which measures how much of your available credit you are using. The higher your total credit limit on your credit cards, the easier it is to keep your ratio in favorable territory. Although store credit cards don’t tend to come with high spending limits, they still add to your total limit. And if you incur minimal charges on these cards, they can improve your credit score.
What’s the right call?
Store credit cards have their drawbacks, such as high interest rates. But they also have their advantages. If you think you can benefit from your new store cards, it might pay off.
That said, if you close those cards, it may not hurt your credit score much, if at all. If you have a high credit limit on your remaining cards, losing the purchasing power of your store cards may not make a huge difference. Closing long-standing credit card accounts can negatively impact your score, but if your cards were only opened a month ago, this shouldn’t be a problem.
There’s nothing wrong with keeping a few store credit cards in your mix. But if you’re holding onto a card that you plan to use infrequently, put it away in a safe place. You may be less likely to detect fraudulent activity on credit cards you don’t use, but you can limit that risk by keeping them safe until you need them.
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