Store Credit Cards Are Now a Worse Deal Than They Were Before

What you should know before you sign up for a credit card from your favorite retailer.

It can be tempting to sign up for a credit card at your favorite store, especially when you can save 15 percent on your entire purchase just for signing up. But beware: Retail credit cards often come with sky-high interest rates and a complicated reward system.

According to a new report, the average APR on retail credit cards has increased by more than two percentage points since 2010 and now sits at 23.23 percent. That’s more than double the national average of low-interest credit cards (10.37 percent) and more than eight points higher than the national average for all credit cards (15.03 percent). said:

High rates make a difference. A consumer who puts a $1,000 balance on the average retail credit card and makes only the minimum payments would need 73 months to pay off the balance and would incur $840 in interest fees. Someone who puts the same splurge on a card with the average low rate of 10.37 percent would pay just $232 in interest — and be out of debt 17 months sooner.

But retail credit cards can be a good fit for some consumers. USA Today said:

For those who pay off balances in full, retail cards with reward programs can make sense. The programs are on the rise. Of the retailers surveyed, about two-thirds offer introductory financing rates, instant rewards or both.

Nordstrom is one such retailer with a tiered rewards program. It offers $20 “Nordstrom Notes” to use at its stores, early access to sales, free alterations and special events, based on a cardholder’s purchases.

While tiered rewards programs are used to entice and reward cardholders, they can also be complex and difficult to understand, turning away the very consumers they’re meant to engage.

“Making the benefits of retail store credit cards simple and clear will be crucial for retailers as loyalty programs continue to develop, especially when consumers face higher-than-average interest rates,” said.

Click here to compare interest rates and rewards for 36 major retailer credit cards.

So next time you’re checking out at your favorite store and the clerk asks if you want to save 20 percent by signing up for a store credit card, what should you do?

“Say ‘no, thanks,'” senior industry analyst Matt Schulz told USA Today.

I have a handful of retail credit cards. I typically use them when I can get a discount simply for putting my purchase on the store card. So my balances are usually low, and I pay them off in no more than two months. In fact, sometimes I use the credit card, then immediately make a payment on the card at the store, paying off the balance within minutes.

Do you use store credit cards? Share your comments below or on our Facebook page.

Stacy Johnson

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  • MrsNCLB

    i only have one store credit…. i do not like the cards, you are right! they are complicated and truly benefit the store…. there are perks but when they related to how much you spend, it kind of defeats the purpose once again…. i always say “no”…. i will pay back the 20% saved in 1-2 months once interest has accrued… and then i’ll be paying the initial “20% i saved” for the rest of my life! do the math… its a lose-lose situation unless you pay off the credit card in full every singel month! and i fi could afford to do that, i wouldn’t have gotten/ or needed the card to begin with….

  • Al Seaver

    Where you really have to be careful is whit longer term credit cards, like the ones from appliance stores and home centers where they offer “0% interest for 24 months” or even longer. The gotcha on those if you don’t make at least the minimum payment every month and if you fail to pay the balance off in the alotted time. If you don’t pay it off in time the interest is then added to your balance starting from the day you made the purchase, even if you only miss paying it off by 1 day or $1. I always just divide what is owed by the number of months owed. I then take at least one of those payment amounts and divide it by the remaining number of month and add that amount to each months payment so at the very least I will have the charge paid off a month early. Mostly, however, I will take two months worth of payments and do the same so it’s paid two months early, and I make sure to check the account balance online every month to keep them honest also.

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