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Harbor Freight sent me a credit card preapproval email today, and I found myself irritated by it.
It’s been nearly 4 years since Harbor Freight launched their credit card, and I feel that they are constantly promoting it and their paid membership program.
I don’t have a high opinion of store credit cards. Lowe’s recently upped their interest rate to an APR of 32%, and other home improvement and tool retailers have similar rates.
Harbor Freight’s rate is 30%, and the same for Home Depot. Technically it’s 29.99%, but I tend to see things in round numbers.
I was raised with the mindset that if I want but don’t need something, I should buy it in cash – or save up until I can. I was also raised to believe that credit card bills should be paid off in full. While it’s not always possible, I was taught to not overspend or carry a balance if it can be avoided.
My parents clipped coupons and made compromises to avoid unnecessary debt.
Harbor Freight’s terms seem reasonable.
Save 5% on “qualifying purchases” or pay zero interest if you make purchases over $299 with an installment plan.
Objectively speaking, a 5% discount can add up to a lot of money saved, IF you pay off the balance every month. And if you can’t pay off the balance every month, 0% interest can work out well if you sign up for the monthly payment plan. NEVER miss a payment either way.
I have a store card to an electronics retailer, and it seems that every month they email me about my available balance. “SPEND MORE!!” they seem to say. That retailer offers a tax credit on every purchase. Like Harbor Freight, they also have financing offers, but I take advantage of the tax discount and pay off the balance every month.
I don’t have cards at Home Depot, Lowe’s, or Harbor Freight.
Should I?
Objectively speaking, I could save some money every year with the 5% discounts they offer. I tell myself that maybe someday I’ll sign up, when I can make good use of the account-opening discount.
Is it foolish of me to forego a 5% discount on “qualifying” everyday purchases?
I remember the first time I signed up for my own independent credit cards, rather than a debit card. I was maybe 20 years old, and I wanted a Citi Dividend card, which offered a cashback percent on every purchase.
Citi called me – I was in my car in a parking lot before heading to or from class – and offered me another credit card on top of the one I was applying to.
Citi said I also qualified for their Professional card. I would get $100 worth of “Thank You” reward points for opening the account, and there was no annual fee.
Okay! I signed up for the two Citi credit cards.
I now consider Citi’s practice to be exploitative. I was a college student with barely any income, and Citi was throwing credit card offers at me.
I like to think that I have been fairly responsible over the years. I sometimes carry a balance, but try to avoid it. Sometimes it’s unavoidable. I also make some purchases in installments if there are zero-interest opportunities.
Objectively, I feel that store cards can be a good idea.
If I have $200 and a new TV costs $500, I save up until I have $500. I have some friends who, with the same $200, would spend $2000 on a new TV.
It was drilled into my head to not spend above my means.
If the water heater fails unexpectedly and someone doesn’t have the cash on-hand to replace it, that’s one thing. The same goes for other necessities, such as car tires, an oven, and so forth. But buying a larger flat screen TV? I was raised with the mindset that luxuries and non-essentials should be saved up for.
A 5% discount can amount to meaningful savings. Zero-interest financing can amount to meaningful savings compared to carrying a balance on a separate credit card.
Still, there’s always a voice in my head saying that store cards are a bad idea.
Emotionally, I feel that store cards have terrible terms and high APR interest rates, and increase the chances of overspending.
Store cards aren’t just about financing charges or convincing consumers to spend more. Let’s say I have a Home Depot card, but not a Lowe’s card. Where would I be more likely to buy a new appliance from, if limited to just those two retailers?
I can understand why stores push them so hard.
I have a clothing store card – either a Visa or Mastercard – I forget – but I rarely use it. It started off as a store card, but at some point was switched to a use-it-anywhere card.
I remember signing up for it in-store, and vaguely recall adding additional items to my order to best take advantage of the sign-up bonus savings.
Today, I have just the one store card to an electronics store, and a department store card as a secondary under my wife’s account.
Whenever I’m asked to sign up for a store card, my automatic response is to decline. Even with the Harbor Freight email I received just now, my automatic response was “no, thanks.”
Objectively speaking, they seem like good deals IF one pays the balance off in full every month or strictly adheres to zero interest financing terms without ever missing a payment. Still, I am vehemently uninterested in store credit cards.
I take advantage of similar terms at an electronics retailer, and so my bias against Harbor Freight’s card seems almost hypocritical. I’m okay with that, as personal opinions don’t always have to agree.
I’m interested in your opinions – what’s your take on store cards like Harbor Freight’s?
