To apply or not to apply

March 6, 2009 11:02 AM

Should we apply for this store credit card or just pay the cash that we have?

My husband and I are both 22 year old working adults with minimal debt. We just purchased our first home at the end of January. We both have credit scores above 750. We just recently got approved for and have used a new credit card with a $7500 limit with no payments or interest for 6 months (through BOA). That card is in both of our names. We each have a card with no more than a $2000 limit also from BOA. The only other cards we have we do not use and have not used in years. (They include a David’s Bridal card, IKEA, & a “funancing” card from GE).

We are getting ready to purchase a table and chair set for our dining room and they (the retailer we are looking into) are offering a credit card that, if approved, offers 0% interest for a year and you get a $25 gc back for every $250 or so spent. We would be getting back roughly $100. So my question is, should we apply? I do not want to do anything to harm my credit score or his. Most of those cards mentioned above are in my name. My husband only has the Visa that has both our names and then his BOA Visa with a $2000 limit. Should we apply under his name?

Thank you so much in advance for any advice!

posted by ForeverDcember to work & money (12 comments total)

Part of your credit score is determined by length of credit. Opening a new account to save $100 to me does not seem worth it especially since you will only be able to use it at that store. Unless you plan to buy again and frequently from this store, I would not open the account.

Also the card you have not used in years, you might want to get a credit report to make sure it is still open. Some times creditors close inactive accounts.

I would use your 7500 credit card to pay for it, the one with no interest for 6 months and plan to pay off the set before the 6 months is up.
posted by deebs at 11:09 AM on March 6

If you can't afford to pay the cash, you can't afford the credit card.
I'd say get some temporary thrift store furniture and save up for the nice stuff. Credit cards are a terrible idea.
posted by dunkadunc at 11:09 AM on March 6 [1 favorite]

dunkadunc, I do have the cash for it. I know better than to get a credit card without having money to back it up. I was just wondering if this was a better way to go.

deebs, I have credit monitoring through one of the big three, I will have to check my report to see those credit cards.
posted by ForeverDcember at 11:16 AM on March 6

In general: credit cards are evil. They are not your friends, despite what the lenders try to tell you. Watch any Mastercard or Visa ad and see how they claim they will help you get the things you want... they don't. They just lend you money at duplicitous interest rates. Don't use 'em if you don't have to. Deals are always offered for new cards because they know how much it's worth to have you hooked.

But, sounds like you two are pretty financially diligent. Best case: save up and buy with cash. Alternatively: I'd agree with deebs - use the $7500 card - but make sure you pay off before the 6 months is up, or they'll slap all that interest back on. And don't buy more stuff until that's done.

You are young and have good credit, and hopefully good financial habits... great time to start down roads that will make you stable and wealthy later!
posted by ecorrocio at 11:20 AM on March 6 [1 favorite]

The store is counting on the fact that you won't pay the balance back before the introductory rate is gone. And also looking for return business...

For $100 in savings it seems rather risky and complicated to open a new line of credit.

Also remember that the process of taking on another credit card involves shifting around your ratio of debt to available credit, so that may impact your score. At the very least the store's inquiry into your credit score will be on your record for two years. That isn't bad, but some places do look at how many cards or loans you've applied for... but IMHO a clear record is better than one with lots of inquires.

You already have a credit card, use it for your table and chairs (or better yet, stick back cash for a few weeks and pay for the stuff outright.)

$100 isn't worth the hassle.
posted by wfrgms at 11:24 AM on March 6

I would just like to stress that I DO have the cash. No saving needed. I have the money right now, hence the question saying "should I apply or just pay the cash we have." :) I just wanted to see if it would be okay to use it for the perk of the $100 gc (that I would use to buy some shelves that I like there). The paying off is a non-issue because I have the money. I just thought it might be worth the extra $100 (in essence free shelves).
posted by ForeverDcember at 11:28 AM on March 6

When I purchased furniture for my house, they offered the same thing -- no-interest loan of money for a period of time. Like you, I had the cash, and I didn't like the idea of additional lines of credit. So, I counter-proposed that I would pay in cash and they could lower my price by the same amount.

They gave me a cash discount, which actually saved me more money than if I'd taken them up on the credit offer. I learned that furniture prices are very negotiable.
posted by Houstonian at 11:47 AM on March 6 [5 favorites]

Houstonian for the win. Cash is a very nice thing for business to have in hand right now, since their own lines of credit are squeezed. Make them this offer and tell us how it works out!
posted by zippy at 1:13 PM on March 6

Whenever there is 0% for X months, I take it, and put the cash to cover the debt into a high-yield savings account or CD for X months, then pay it off right before the 0% expires. I am a big fan of 0% lending, it lets me earn more interest. Though right now you're not likely to get more than 3% or so, that's still a little cash in your pocket, and no extra money in theirs.

Also, if your guy's credit file is thin, this is a good way to beef it up. Having good credit is very important, and the more opportunities you have to show you can pay creditors back, the more potential creditors (like mortgage officers and such) like you.
posted by rabbitrabbit at 10:51 PM on March 6 [1 favorite]

Having a new store (retail) credit card automatically decreases your credit score approximately 30 points. I learned this the hard way when I signed up for a Macy's credit card a few years back. Don't do it!
posted by bacall423 at 3:02 PM on March 7

I seem to be on the other side of the fence here. I had a 12 months same as cash offer from 1-800 Mattress when I moved and bought a new bed. I could have paid for it from my emergency fund however I chose the 12 month offer. I divided the total by 12, allowing to pay it off before the 0% expired and the finance charges accrued. This way I could keep more in my e-fund for other important moving expenses that couldn't be financed and I didn't pay interest. And my score went down 5 points, was back up where it had been in September, <2 months later and higher the following month. Was at 740 at the time of application.
posted by TravellingCari at 7:44 AM on March 9

Having a new store (retail) credit card automatically decreases your credit score approximately 30 points. I learned this the hard way when I signed up for a Macy's credit card a few years back. Don't do it!

It's true that [depending on what your credit file looks like] opening a new credit account can temporarily decrease your credit score. However, within 6 months your score should be higher than it was before you opened the account, assuming no other changes.
posted by rabbitrabbit at 9:16 AM on March 9