When a Deal Isn’t a Deal

So, you’re just about to pay for your items at your favourite department store. The clerk tells you if you sign up for their credit card, you can get 15% off your entire purchase, immediately.  Sounds awesome, right?

What most shoppers don’t realize is that perk could actually hurt your credit score and, cost you big time if you don’t pay the card off in full. Which, they’re banking on you won’t.

At a whopping 29% interest rate, department store cards are just a bad idea.

Why would these cards hurt your credit score?  First, they're usually easier to be approved for than a traditional bank credit card.  And second, the algorithms used by Equifax and TransUnion (the two credit reporting agencies in Canada) see paying for a high interest rate card as a risky credit behaviour.  After all, if you could get a card at your bank with a rate far lower, why wouldn't you.

Also, if you think you're being clever by taking the offer at the time of your purchase, thinking you don't have to 'activate' the credit card when it arrives, don't be fooled by that logic.  The moment you sign the terms and conditions of the department or big box-store card, you've committed to it.

To discover more money traps and how to correct them, get your copy of Talk Money to Me: Save Well, Spend Some, and Feel Good About Your Money in stores December 17th and available at Amazon and Chapters for pre-order now.

As the Consumer Advocate for FP Canada, I know that financial literacy is paramount to your well-being. Equally important to your long-term success is working with a qualified professional. To find a CERTIFIED FINANCIAL PLANNER® professional in your area that will help guide you on all matters of money, check out this Find Your Planner tool.

FP Canada is a national professional body working in the public interest (formerly known as the Financial Planning Standards Council). FP Canada is dedicated to fostering better financial health for Canadians by certifying professional financial planners and leading the advancement of professional financial planning in Canada.

For more on financial planning and how to get started, watch What is a financial planner? and What is a financial plan?

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