It’s that time of year.  Many people are already shopping in anticipation of the upcoming holidays.  And with the current economy, several stores are starting their holiday push earlier than usual to get even more people through their doors.

As personal budgets get tighter and the pursuit of savings and good deals becomes more important, people are often enticed by the checkout clerk’s offer to “save 10% (or 15 or 20%) on your total bill today by opening one of our charge cards; it’s easy to do and only takes a few minutes”. 

Sound familiar?  Most of us have heard those words before.  And there is the temptation to save some money and postpone the payments for a few weeks or a month to save your precious cash.

Here are some things to consider before you sign on the dotted line to save a few bucks.                  

1) Every time you authorize someone to check your credit, it shows on your credit report as a Hard Inquiry.  These Hard Inquiries will stay on your report for two years and can count from 1 to 12 points EACH against your credit score.  So if you have a marathon shopping day and apply at six different stores, you could potentially drop your score more than 70 points.

2) Just because you apply does not mean that you will get the credit card.  However, the Inquiry stays on your credit reports for two years whether you get the account or not.

3) Many retail credit cards have double-digit interest rates.  That $200 purchase you opened the account for to save 10% ($20) could end up with much more than $20 in interest payments if you pay the balance off over time.  Always read the fine print in the agreement before applying and know what you’re getting into.

4) If you are planning a major purchase in the next few months such as a home or auto loan or a mortgage refinance, keep in mind that most lenders look at your DTI, debt-to-income ratio.  Credit card accounts with balances will likely be included in your debt total.  Also, in addition to the hit your scores take from the Inquiry, opening new accounts usually causes a slight drop in scores for the first few months after the account is opened. 

So the interest rate on your future loan could be much higher due to a lower credit score.  This can add up to thousands of dollars over the life of the loan and would certainly wipe out any $20 or $30 savings from opening that new retail store credit card.

Be credit smart and shop wisely.  Order your personal Credit Analysis that includes strategies for increasing each of the five parts of your credit score.