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The Dangers of Holiday Credit Applications

The day after Thanksgiving marks the beginning of the busiest shopping season of the
year, Black Friday through year’s end. Many consumers will spend more at retailers
between Black Friday and the end of the year than they spent during the previous 47
weeks. The retailers will see us coming and they’re armed with “20% off” offers if we’ll
apply for a store credit card.

This might seem like a smart move, saving money on your holiday purchases. But when
you start peeling back the onion you quickly realize that you’d be mistaken. Here are
three reasons why it’s smart to avoid opening retail store credit cards:

LOW LIMITS/HIGH INTEREST RATES – Retail cards have sub-prime terms. The
interest rates on store cards are almost always well into the 20’s and the credit limits are
initially very low, usually below $1,000. These are your terms regardless of your credit
scores. Revolving even modest balances will quickly negate any discount your received
and can lower your credit scores because of the balance-to-limit ratio being higher due
to a low credit limit.

CREDIT SCORE IMPACT – One is bad, more is worse. When you apply for credit at
the register you’re giving permission for the issuer to pull you credit report. This means
a new “retail card” inquiry will hit your credit report. These are among the worst type of
inquiry for your credit scores. And if you fall for multiple offers you’ll be compounding the
damage…for 12 months. The damage is done even if you immediately close the account
after the holiday season.

USABILITY – You better like the store. Unlike general use credit cards, retail cards can
be used at one store or one chain of stores. This is an incentive to use multiple cards,
which is problematic for your credit scores. Using multiple cards populates your credit
reports with nuisance balances, which can lower your credit scores while making the
same purchases, in aggregate, on a general use credit card with a high credit limit would

be much less damaging.

Michael B. Citron is an internationally known public speaker and author. He lectures for professional associations worldwide. Michael is a serial entrepreneur who is dedicated to living the American dream, and helping others to do the same. His role at DisputeSuite.com has placed him in the spotlight of the credit repair industry. DisputeSuite is the largest provider of technology and education services to the industry, and has been a catalyst in the forward movement to standardize the credit repair industry.

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