Having a Best Buy Credit Card Might Hurt Your Credit

Best Buy Store

Best Buy has the best electronics, and most often the best prices. It’s the reason so many consumers opt to apply for a Best Buy credit card so that they can save money, earn points and still buy the things they want without worrying about their credit score. If the Best Buy credit card is one you’ve been thinking of getting, it’s a good idea to weigh both the pros and cons, and then make an informed decision that will help you decide whether or not to apply. There’s no doubt that Best Buy is one of the most popular retailers in the country, especially around the holidays, but does it make sense to have one of their cards?  Let’s take a look.

Pro: Rewards

One of the biggest pros about the Best Buy credit card is all the cool rewards you get (and yes, we could come up with a dozen better adjectives, but ‘cool’ cuts right to the chase). When you sign up for the card, you immediately receive a 10% discount in the form of rewards whether you shop online or in the store. These rewards are given to you in the form of Best Buy gift certificates when it comes to redeeming them, so you essentially get a great discount on everything that you buy when you use this card. How so? Every 250 points you earn will earn you a $5 Best Buy gift certificate. Since it’s so easy to get one of these gift certificates, it’s even easier to want to shop Best Buy for your electronics needs.

Pro: Choices

Who doesn’t love a good choice? Parenting experts agree that when you give children choices it makes them feel as if they are in control of their life; and control is what kids want. For example, you offer up two outfits for your toddler to choose from and you get your way because you chose both, but he gets his way because he gets to wear the one he wants. He feels he wins, you feel you win, but everyone wins. The same is true of adults, even though it’s not so obvious.

With the Best Buy credit card, you’re given a choice. You can either choose from an 18 month special financing offer on any purchases you make that exceed $429 or you can choose to get 5% back in rewards for all your purchases. It’s up to you. It all depends on what you want, what you need and what you think will work better for your own life and your own personal financial situation. There are other financing needs you can choose from as well, and that’s what makes life a bit easier with this credit card.

Con: It Can Hurt Your Credit

The good news is that this does not have to be a con. You can apply for the Best Buy credit card without worrying that you will ruin your credit. So that you understand how the card can ruin your credit, we will discuss it. The first way is that applying for the card will cause your credit score to decrease a few points; every credit card application has this affect on a credit score. Let’s just say that it’s not this card in particular that hurts your credit; it’s how YOU use the card.

Additionally, you can also use this card to hurt your credit by not paying on time. If you do not pay your bill on time each month, you will be reported to the major credit bureaus. This means that you will have a hit on your credit report, which will cause your score to lower. Another way that this card can affect your credit score is if you do not pay your bill in full each month. This is not to say you have to pay the full balance (though that’s what is highly recommended) this means you have to pay at least the minimum amount due on the statement. Anything less will result in a credit bureau notification by the company.

Finally, you can hurt your credit with this card by keeping the balance higher than 30%. Ideally, credit scores are based on many factors. But one of those is not running up the balance of your cards. You can keep your score high by keeping your continuous balance less than 30% of your credit limit. For example, if your card limit is $5000, you’ll want to keep your balance at less than $1500 at all times.

Con: High Interest Rates

This is something that most people cannot control. Of course, the better your credit score the lower your interest rates will be on all credit cards and loan accounts. Of course, the lower your credit score, the higher your interest rates. However, as of 2013, the average interest rate on the Best Buy credit card was anywhere from 25.24% to 27.99%, and that’s a very high rate even for people with less than stellar credit.

The rates change from time to time, and with the economy slowly improving, many banks are lowering their rates. However, HSBC is the issuing bank behind the Best Buy credit card, and it’s common knowledge that they always have higher than average rates. This could mean nothing to you if you are someone who always pays your cards off in full each month. Without a balance, you don’t have to pay astronomical interest charges. However, to those who are carrying a balance, this is a very hurtful rate. Let’s take this into consideration; a Best Buy Credit card with a 24% interest rate and a balance of $1500 is paying an additional $36 per month in interest. If you make a purchase for $1500 and take a year to pay that off without special financing, you’re actually spending $1932 on that purchase in the course of one year. If you bought the same $1500 item with a regular credit card with a 13% interest rate and spent 1 year paying it off, you’d pay approximately $1734 on the purchase.

Photo by Scott Olson/Getty Images

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