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How Zero-Interest Cards Could Harm Your Credit

Best Buy's "featured offer" seems like a no-brainer for buying brand-new electronics — two years with no interest comes across as a great way to buy it now and pay later without punishing interest charges. If you're not turned off by the notion of being accountable for yet another credit card, then here's something else to consider that might make you think twice about financing your new TV with a store's zero-interest proprietary card.

You know that a credit inquiry can temporarily shave points from your score, but the low credit limit on these store cards may have a more negative impact. Your credit-to-debt ratio makes up a large part of your overall credit score, and The Wall Street Journal emphasizes that "credit bureaus look at how much of all your available credit is borrowed as well how much you've used on each card." The article uses the example of purchasing a $2,000 TV on a card with a $2,500 limit; that's utilizing 80 percent of available credit, which doesn't do any favors for a consumer's credit score.


piper23 piper23 9 years
Totally off subject but since Best Buy shown in the picture just thought I'd let you guys know that Best Buy has an outragious "Restock Fee" of certain merchandise. Outragious meaning you will owe 15% of the cost of the merchandise just to have them take it back. Just imagine how much the fee would be on a big screen LG. I was pretty amazed at this fee so I checked it out on their website and it is absolutely true. I cut up my unactivated Best Buy card immediately.
nv27 nv27 9 years
Credit is so confusing. I would want to cancel the account so it couldn't be accessed and used by some hacker, but I would also want to keep the account open for the available credit thing on my credit. Im having this same dilemma with my Chevron card. I dont use it anymore b/c I'd rather use my Amex and get 3% cashback on gas purchases. So should I close my Chevron account? We're in the same boat Hithatsmybike.
ilanac13 ilanac13 9 years
i don't know if you should cancel the card - don't credit agencies look down on that? just keep it open and cut up the card. i bought furniture a few years back on a card that had 0% interest and not payments due for 2 years - and that's something that i needed since i had just moved to a new state and needed stuff. i know that it probably wasn't the smartest thing to do - but it was a necessary evil unless i wanted to sleep on the floor w/ nothing to put my clothes in etc. i always worry about how inquiries affect my credit score so i don't like to even consider opening new accounts. now that i know that it can temporarily lower my score - that's even more incentive to just say no!
hithatsmybike hithatsmybike 9 years
This is how I bought my computer last year.. on a 0% interest store card. It was even from Best Buy! But my computer was $2500 and the limit they gave me on the card was SIX THOUSAND! (I know, like wtf would I buy with $6000??). The balance on it is currently $0 (actually -$1 credit to me! haha) and I'm planning to cancel.. but then that thought about debt-to-credit ratio always creeps in my mind. I have a line of credit also (that carries a balance half of that available), so would canceling this store card be a bad move? Is it better to just carry an empty card to maximize my "available credit" even though it's at a store where I don't plan to make any purchases on credit again?
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