6

I am interested on buying a computer (approximate cost USD 600).

I can pay for it either with my credit card, or apply for credit in the computer store.

What are the advantages of using one form of payment over the other?

  • Do you have the cash, and you are using credit to improve your credit report, or do you not have the cash? – MrChrister Mar 30 '12 at 16:29
  • Do I need to bring my physical credit card when using credit card as a payment or I can just provide them the details? – user47793 Aug 25 '16 at 20:00
  • @markydoodle - That seems like an unrelated question. You should ask it. – Bobson Aug 28 '16 at 4:24
15

Using your credit card:

  • May earn points for your credit card rewards program
  • Major credit cards usually have lower APR's than store credit cards, so smaller interest charges if it takes you a while to pay
  • Convenience of all expenses appearing on one bill, easier to pay down

Applying for a store credit card:

  • May get one-time discount, or several months of no interest, for opening an account
  • Hassle of applying for a new account
  • Hassle of them trying to sell you credit protection, insurance, etc for additional fees
  • Hard credit pull will hurt your credit score for a brief time
  • Additional available credit may help your credit score
  • Additional available credit may tempt you to go more into debt
  • Additional account may help or hurt your credit score, depending on your number of accounts and their average age
  • May be a big hassle to close account if desired

In general it is far better to not buy bigger items like a computer until you can pay cash, or pay for it on credit card (to get reward points) and then pay off the card the next month so you don't pay interest.

  • 1
    I would argue you have Hassle of them trying to sell you credit protection, insurance, etc for additional fees on Credit card as well. You also left out the higher utilization of the credit card could cause a credit hit until it is paid down. – user4127 Mar 30 '12 at 18:30
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    @Chad True, although store cards will sometimes opt you in to extra programs when you apply. Major cards usually ask first. Re credit utilization, I think that would be the same regardless of which card you use, unless the store card does not report to credit bureaus. – Steven Mar 30 '12 at 21:18
  • Another thing to consider is that carrying a balance on a credit card usually results in losing the grace period. So you should not generally use the same card for both revolving credit and longer term credit. – Peter Green Sep 2 '17 at 13:27
12

Since you have a credit card, I recommend you use it for the purchase.

It gets you two things at the very least:

  1. Gets the purchases reported as credit utilization. If you handle that correctly, you can improve your score

  2. Most card vendors give free extended warranty and return policies that a retailer or manufacturer does not without extra fees.

I buy all my electronics using my cards and not only does that optimize my scores but I have been able to enjoy painless/better RMAs for defective products just because my AmEx card would have refunded me the money anyways and the retailers knew it (AmEx would have recovered it from them in the end so it was in their interest to resolve the matter within 30 days)

  • 2
    +1 for Item 2, the free warranty or, in some cases, doubling the warranty period (up to one year, or more, depending on the card). – Dilip Sarwate Mar 30 '12 at 19:29
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    Great point on the warranty, so few people know about that (and remember to use it!) – Steven Mar 30 '12 at 21:19
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    Thank you gentlemen. I am a bit obsessive about reading T&C of stuff I use and discovered these gems in my credit card T&C. – f1StudentInUS Mar 31 '12 at 1:37
5

As far as the money goes, it all comes down to the terms. What is going to cost you the least? Look for hidden fees and costs with the store credit. You will need to read the fine print of the credit agreement some automatically sign you up for a service that will cost you extra money every month.

Compare what the costs are going to be over the term you will pay it off.

A good calculator to help you figure this out is http://www.amortization-calc.com/ It is designed with larger loans but works for smaller loans too.

Realize that you will have to add fees and finance charges into the total loan amount to get a good comparison.

** Unless you NEED a computer you should wait until you can afford to pay for it. Charging these types of expenses tends to lead down to a pit of debt that is hard to get out of. Wanting a computer really bad is not the same as a need.

  • 2
    "Wanting a computer really bad is not the same as a need." - unless the desire becomes pathological... 8-) – ysap Mar 30 '12 at 17:39
  • @ysap - If you have that kind of need then I doubt you are taking time to post here before making the purchase... I will admit to some do as I say not as I do there anyway but I know what kind of debt level I can handle. – user4127 Mar 30 '12 at 18:32
2

The downside of the store card is that the "deal" for using the card is typically 6-12 months of "no payments" or "no interest". In reality, the "deal" is deferred payments/interest.

The problem is, if you miss any payment, or fail to pay the computer off in full, you'll have to pay for the accrued interest -- at a rate typically 25% or higher. That means if you buy your computer for $1,000, and pay $999 at the end of 12 months, you may have to pay $250 in accrued interest.

These cards can be great deals, just be really careful!

1

In my experience dealing with credit cards and store cards, you may find that the store card is much more flexible than the credit card in terms of the enforcement of the card agreement.

For instance, I've missed payments on credit cards and only been 1 day late and saw a rate increase, but on a store card when the same thing happened, it was like they didn't even notice. Granted, this was a 100% store card with no VISA/MC logo on it, and it was through their bank. This may not be true of all store cards and your experience may differ, but I felt like the store card was more of a tool for acquiring the merchandise and helping the store make a sale than it was for some big bank to make money off of my interest.

With credit cards, you are the product, and the bank makes money purely from interest. The store, on the other hand, makes money from selling the product, and credit helps increase sales.

My suggestion is to avoid credit altogether as all debt is risk, but if you must use credit, you may have a better experience with the store card. Of course, don't forget to consider the interest rates, payment plan, and other fees that may apply as they may affect your decision in terms of which to go with.

-1

you should pay cash. always pay cash or debit card. never use credits unless absolutely required.

if you so poor that you need credit card you must reduce your costs! don't buy anything except food, start making money, then you will buy everything!

and you should buy cheapest food now

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    @Victor you should try to earn 1000$ a year spending less "forces". It's hard to control your credit card. You should always think about balance and about when you should pay and you only get 1000$ for this. It'w very low-paid job. – javapowered Apr 4 '12 at 14:46
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    @javapowered, it is called managing your money and accounts and it should be done whether you have a credit card or not. I spend 10 to 15 minutes each month checking my statement, putting an entry in my diary when the bill needs to be paid and then making the payment electronically when due. If you call this a job then you are a lazy bugger. So for a maximum of 3 hours every year I increase my savings by $1000+ each year, that is over $330 per hour. And as I mentioned earlier a few times I mainly pay bills and essential item with my credit card, things I would normally have to pay anyway. – Victor Apr 5 '12 at 4:30
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    @javapowered, I get bonus points for my spending on credit card, but that is just that a bonus, how much interest do you earn on your funds in your debit card account? I get 6.36% in my savings account. I pay no annual fees, and I wouldn't use my credit card to withdrawl money, and I don't really need to withdrawl much anyway, being able to use the credit card in most places. As I said a credit card is simply a tool just like a drill, some people use them better than others. – Victor Apr 6 '12 at 6:16
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    @javapowered, as I said the bonuses are just that I don't rely on them. My qustion was how much interest do you earn on your debit card account? Also, regarding payment I could easily set up an automatic payment up and never look at my statement, but I prefer to check my credit card statements plus my savings account and loan account statements to make sure no one is ripping me off, just as you should for all of your account statements. Plus you also need to make sure you have enough funds in your account before you make a purchase or you will be charged interest for a negative balance. – Victor Apr 9 '12 at 0:52
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    @javapowered, also as I mentioned I do not use my Credit card to make withdrawals, the little withdrawals that I do make I use my savings account. Please stop repeating the same things over and over again because you don't read my replies properly. I am in a different country from you and the deals are different. I think a credit card is a great tool and it suits my purposes greatly. I am disciplined in my spending and know how to use a credit card properly, END OF STORY! – Victor Apr 9 '12 at 0:56

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