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

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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 CreditCards.com 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). CreditCards.com 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,” CreditCards.com 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,'” CreditCards.com 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.

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