Target Red Card: A Good Thing or Not?

With all of the ways to save money, one thing I hear many of you say all of the time is to use your Target card so you can save 5%!    I agree that saving money is great, but at what cost?

First of all, let me explain what the card is and what it offers.  When you use your Target Red card, you can save 5% off of all of your purchases – all of the time.  You can also get free shipping when you shop on-line.  You can sign up for either a Target RedCard Visa credit card or you can get the debit card, which will be attached to your checking account.  The choice is yours, depending upon your spending and/or lifestyle.

So, if I can save money, why wouldn’t I?  The reason is simple.  Cash.   I just don’t believe in using plastic for these types of purchases.  When the average person uses their credit or debit card, they usually spend more.  It just human nature. It’s probably even happened to some of you.  You walk into Target to get 4 item and end up walking out with 10.  Would you do the same if you had cash in your pocket vs. plastic?    Probably not.

You may have saved 5%, but if you don’t pay off that credit card right away, you will have to pay interest.  The interest you pay could be more than what you ended up saving on your initial purchase – which means you are paying them to save money.  I know some people are dedicated with doing this (and kudos to you) — however, many fall into the simplicity and ease of paying only the minimums each month.  If you do elect to get a Target RedCard, please do so only if you can pay it off each month and never pay interest.

I also hear some people say that they use their debit card and not the credit card, so it is like using cash.  Well, yes and no.  Yes, it is tied to your checking account and is immediately withdrawn to pay for your purchase.  However, it is not cash.  Cash is the green stuff in your wallet.  Again, when you use cash, you really do tend to watch your spending.

Spending the green stuff is much more difficult than pulling out the plastic.  Not only that, if you trying to get out of debt and using the envelope system, you really should not be using your checking account anyhow – right?  I have people say they budget for it and leave it in the account.  Many of those same people tell me that they also tend to exceed the monthly budgeted amount as well.  It is just too easy to say “Oh – it is only an extra $20 over my budget.”  But, when you have cash, you can’t spend that extra $20 — you just don’t have it to spend!

I also want to make sure you really know how much you end up saving.  If you spend $100 a month at Target or $1200 a year, you will save $60 by using their card.  That is about $5 a month.  Yep – just five bucks.

For me, the Target RedCards are not worth the savings.  The reason is simply based upon our beliefs when it comes to budgeting and spending.  However, it might work for you.  Just make sure you take all of these factors into consideration before applying so you know what you are doing and can make sure that you do not allow the hype of saving 5% to overrule your clear thinking.