Never, ever ever is it a good idea. Here's why....

1. Every time you do so you give the lender permission to pull your credit. The inquiry is of the "hard" variety, which means it might hurt your scores. If it does, the damage lasts a full 12 months. Inquiries don't diminish in negative value with time as other derog data does. Why take the chance to save a few bucks?

2. The credit limit on retail cards is normally very low. This means that with even responsible usage the card is likely to be more "utilized" than you'd normally keep another card. Again, this can hurt your credit scores. So, why take the chance? This is ONGOING damage, not just damage at inception.

3. The rate on retail cards is not determined by straight credit risk like that of a bank issued Visa or MasterCard. That means your rates are likely to be disproportionate to those of your other cards, especially if you have good/great credit. E.g....My lowest FICO score is 807 (and has been right around there for almost 15 yrs) and every retail card I've ever opened has rates in the high teen or 20's. That means if you ever do revolve a balance then you're likely to chew away any savings you realized.

4. Retailers make money from the sale of the merchandise in addition to their lending arm making $$ from interest. That gives them the flexibility to offer 10%-20% off. Their goal is to get their card in your wallet. Then they go to work on you. Do you really want that?

I've had it out (almost physical) with CFPs who argue that with proper planning and timing there's nothing wrong with doing this. My arguement is that you don't know what you don't know. You have no idea if you'll need to rely on your credit reports and scores some time in the next 12 months for an emergency loan, job application screening, auto or homeowner's insurance...or what if your car poops out on you and you need a car loan? Any damage you've done to your credit and scores will far outweigh any benefit. Do some math...figure out what an additional 50bps will do to a 30 yr fixed mortgage of $300,000. It's never worth it.

And it's even less worth it when the issuer is offering coffee mugs and t-shirts at the airport in exchange for you applying.

I'll make you a deal Erin...let me know the next time you go shopping and I'll send you $25. That's probably close to 10% of what you were going to spend. I'll sleep better knowing you didn't use your credit report as a coupon.

Ha ha! Thanks John, for the conviction of your reply. I won't take you up on it, but you've convinced me to not open any more of these cards.

Too many credit cards can spoil your FICO score which is calculated on ratio of income to debt.
Too many cards offer the possibility of exceeding
a credible ratio.

I'm glad John joined this discussion. As always, he makes good points. However, I think he sometimes sees black and white when the reality is grey. :) Let me address his specific points to try and illustrate what I mean.

1. John is right that a new credit application means a new "hard" inquiry. But his point that "Inquiries don't diminish in negative value with time as other derog data does" is misleading. Here's why. First, if I have only one inquiry during that past 12 month period, it won't hurt my score significantly and may even help it, depending on my profile. More important, once inquiries "age off" my report, they do NO damage at all...unlike a derogatory. Inquiries have to be looked at as a whole. If you already had three or more credit card inquiries within the past year with a specific credit reporting agency, I'd agree with John that you should pass on a new store card application. But if you've only one or none? Then there's really no need to worry.

2. John is right that the credit limit on these cards is generally lower, and that can be an issue. That's easily addressed, though...just make sure that you are aware of your limit, and don't your balance approach your limit--or if you do, pay that balance way down before your billing statement closes. That will address the problem.

3. Again, John is right that store rates are generally high. On the other hand, sometimes they are very low, IF you play by their rules. The answer here? Don't revolve balances on store cards, unless you are using a promotional offer and your follow the rules VERY carefully.

4. Finally, yes, retailers offer credit cards because they make money with them. Just like all other creditors do. :) And frankly, as long as their product saves ME money, the fact that they are in the business to make money is no skin off my nose. ;)

John is entirely right about one key thing: should you need to use your credit for major borrowing (home loan, car loan, et cetera), damage you might do to your credit profile will likely far outweigh the benefit something like a store card may have offered you. But these aren't really arguments against ever opening a store card. Instead, they're arguments for always keeping a strong, "prime" credit profile. And on that issue, John and I are in complete agreement.

Bottom line? Err on the side of caution when opening store cards. And if using them does make financial sense for you--as it will for some---make sure you pay careful attention to details like your credit limit, high standard interest rate, and what a new account might do to the "hard inquires" portion of your credit report.

While no one will get in trouble following John's advice, there's a good reason other CFP's disagree with him on this. They are correct that "with proper planning and timing" (as John puts it), the benefits of a carefully chosen card can be substantial, while the risks can be reduced essentially to nil.

What John said...when it comes to credit, my answer is always "What John said" ;-)

Hi Erin,

It sounds to me like you are asking two separate, good questions here: (1) is opening a store credit card worth the costs of doing so, and (2) will having several inactive store cards detract from my credit report. Tackling the second question will help us evaluate the first question, so I'll start with that.

Typically, several inactive store cards on your credit report will not compromise your ability to get new credit. If you have any late payments or other "derogatories" on these accounts, or have opened more than two or three very recently, those factors will work against you somewhat. John, our credit monitoring guru here at FiLife, can give you more details about how credit scoring and profiling works if you pose a question to him in the Credit Monitoring section.

Given that, is it worth it to open them? Sometimes, yes.

I think that before opening a store card, one should carefully consider how much benefit one is likely to receive from the card. If it gets you 10% off the $4,000 living room set you would be buying anyway--saving you $400--that might be a strong argument for getting the card. Likewise, if you see yourself shopping at the store and using their credit promotions frequently, that's also a good argument for getting the card. (Macys and JCPennys are two retailers I'm familiar with that regularly give their card holders sizable discounts. So if you shop at one of those stores frequently, getting their card might be a good bet.)

On the other hand, if opening the card is likely to save you 10% off a $50 shirt but then not get used again, I'd pass.

One last point. Once the store credit cards are open, any damage to your credit profile has already been done. Because older, "paid as agreed" accounts help your profile, it's therefore generally a good idea to keep them open once you've opened them.

it depends on YOUR situation, YOUR credit skills & YOUR ability to balance your budget

only going to be worth it if you pay the card off before the first month is up. typically these cards have high interest rates on them and they will make back the discount they gave you at the time of purchase within a month or two. i wouldnt recommend it unless you are disciplined and will pay it off very soon.

Many store cards have interest rates that the mob would be happy with. If you're going to get the card for the discount make sure you can pay that balance off immediately.

I do not buy stuff frequently and my purchases at any point of time do not cross $100, so I stay away from these cards.
Yeah! the day I will buy $300 worth Citizen watch, I will do take the card and will pay off the balance with in a week.