Here’s why you may want to say ‘no’ to a store credit card offer this holiday shopping season

Personal finance

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In the rush at the store checkout this holiday season, you may be tempted to say yes when asked if you want to apply for a store credit card — especially if you’re offered extra savings on that day’s purchase.

But there is good reason to think twice this season before signing up — soaring interest rates could mean you’ll ultimately pay more than you save from any perks a store brand offers.

The average retail credit card charges a 26.72% annual percentage rate, which measures how much it will cost per year if you carry a balance, according to a recent analysis by CreditCards.com.

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Some brands are charging as high as 30.74%, which is “crazy high,” according to Ted Rossman, senior industry analyst at CreditCards.com.

Overall, variable credit card interest rates have recently climbed to 19.14%, according to Bankrate.com.

The higher rates come as all kinds of borrowing has become more expensive as the Federal Reserve works to combat record high inflation.

“If you’re going to carry a balance, it’s definitely a big risk,” Rossman said.

Which brands tend to charge most

Retail credit cards generally come in two varieties: a store-branded credit card or a card co-branded with other names, often Visa or Mastercard.

Store-only credit cards are now charging an average of 28.22%, while retail co-branded cards are charging an average of 25.01%, CreditCards.com found.

Some brands tend to charge higher rates.

Those that may charge maximum APRs of 30.74% include the Speedy Rewards Mastercard, Kroger Rewards World Elite Mastercard and nine brands associated with Kroger, according to CreditCards.com.

But borrowers may get better deals on those cards based on their credit records.

Other store-only cards may charge 29.99%, including Big Lots, Discount Tire, Jared, Kay Jewelers, Piercing Pagoda, Sterling Family of Jewelers and Zales, CreditCards.com reports.

Tips to keep in mind

As inflation has continued to push consumer prices higher, more than a third of shoppers — 35% — say they may apply for a retail credit card this year, up from 29% last year, according to a recent LendingTree survey.

“It’s really important that you understand what you’re getting into before you apply,” said Matt Schulz, chief credit analyst at LendingTree.

It may help in the long run if you resist accepting an offer at checkout on the spur of the moment and instead dig deeper into the terms and conditions before signing up later, he said.

Borrowers should also be wary of deferred interest offers, which enable consumers to take advantage of 0% introductory rates. But once those expire, they may be charged retroactive interest on their balances.

“Be especially wary if a store card is offering a deferred interest promotion,” Rossman said. “That retroactive interest can really hit you.”

You may also want to consider alternative borrowing methods.

While a big ticket purchase can offer substantial savings on a store credit card, the potential rewards through a general purpose credit card may be even more generous or better match your spending style, Rossman said.

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