Instant Store Credit: Save Now, Pay Later

It can be tempting to sign up for a retail credit card to take advantage of instant savings and attractive perks, such as exclusive coupons and special sales. But think twice before you put another piece of plastic in your wallet. If you don't pay the entire balance when you get the bill, store cards can hit you with high interest rates -- up to 25% in some cases.

You should also be aware that a retail card can hurt your credit profile. If, say, you run up a large balance against a modest credit limit -- retail cards usually carry lower limits than cards from Visa or MasterCard -- you could increase your credit-utilization ratio and lower your credit score.But if you're trying to build credit or repair a damaged credit record, applying for a retail card could be a good option. A store card is often easier to get than a traditional credit card, and you generally don't need as high a credit score.

That said, retail-card issuers are paying closer attention to your finances. The new credit-card rules require issuers to consider a borrower's ability to repay before granting new credit or upgrading an existing card. "The barrier to entry has been raised, even though it's invisible to consumers," says Ben Woolsey, director of marketing and consumer research for CreditCards.com.

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Despite the increased scrutiny, getting credit at the cash register remains instantaneous for most shoppers. And if you're spending thousands of dollars on a major purchase, such as furniture or appliances, signing up for a retail card that offers a discount may mean hundreds of dollars in your pocket. Just be sure you're disciplined enough to pay off the balance promptly so that you won't be hit with a high interest rate.