Should you say yes to a new credit card? New cards double during holidays

Should you add one more to your stack of credit cards?

Should you add one more to your stack of credit cards?

Whether you’re shopping online or in a store, you’ve probably been asked whether you want to open a credit card specific to that retailer to qualify for a deal or discount.

Should you? Experts say it might not be the smartest move because it can hurt your credit score.

The holiday shopping season is prime time for shoppers to open yet another credit card, even though their wallets are already bulging with a colorful collection of plastic.

In fact, TransUnion, one of the nation’s three major credit bureaus, said this week that for big box discount retailers and online retailers, the number of new accounts often doubles during December. Jewelry stores experience new card openings close to that level, and for department stores, it’s 1.5 times the level of the non-holiday season.

The number of consumers with “private label” credit cards jumped from 123.7 million in December 2014 to 124.8 million in December 2015. As of the third quarter of this year, the number of consumers with retail cards grew to 135.2 million and will likely “grown substantially” during this year’s holiday season, TransUnion says.

More cards and more shopping results in, you guessed it, more delinquent payments.

Nidhi Verma, senior director of research and consulting at TransUnion says, “Typically, retail card delinquency rates are highest during the fourth quarter of every year, as some consumers may face challenges after shopping or opening new cards.”

Some consumers forget they opened a new card and miss the first payment, Verma said, cautioning consumers to not overextend themselves during the holiday shopping season.

The experts at MyFico.com, the consumer division of FICO, which issues the credit scores that are the global standard for credit risk, say that consumers should only apply for credit they need and  plan to use.

Saving 10 percent on a purchase doesn’t qualify as needing credit, MyFico advises. Often, the initial 10 percent savings is offset by high interest rates. Opening unnecessary accounts can also backfire when you need to make a big purchase and find that your score has dropped and that you no longer qualify for the best rates.

“There is no “golden number” of charge cards, but opening cards just to gain a small savings is usually a bad idea,” MyFico says.

For more information about credit scores from MyFico, click here.

 

 

 

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