Looking for a Store Credit Card? Don’t Look Here

Store credit cards can sometimes seem like the bargain of the month, especially when you’re standing at the cash register, ready to check out, and the pretty cashier tells you that, if you “sign-up today”, you’ll get an extra 10, 15 or 20% off of your total purchase.

While that discount certainly will lower your cost at the register, the fact is that if, you don’t pay it off directly at the end of the month, there’s a good chance you’re going to pay through the nose for those purchases because most credit cards that you get from retail outlets have APR interest rates that are insane.

According to credit card comparison website CreditCards.com, in a survey that they recently performed including 61 major retail credit cards, those cards are coming with increasingly high APR rates. In fact, they averaged 23.23% as opposed to a 15.03% for all credit cards in general, which is up over 21% since 2010.

If that doesn’t alarm you, maybe these numbers will; if a consumer spends $1000 on a retail store credit card and only makes the minimum payments, it would take them six years to pay off that $1000 and, by the end of that six-year period, they will have paid $1840 for that item, an 84% markup!

A number of things have brought about this increase in retail credit card interest rates, including the Credit Card Act of 2009,  which put into effect much stricter rules on the fees that retail credit cards can charge their consumers. The industry immediately began looking for ways to make back some of the money that they lost, and even more money that they lost during the recession. Analysts also believe that, as the Federal Reserve rates continue to rise, retail credit card rates will rise with them.

Charles Tran, the founder of CreditDonkey.com, a credit card comparison website, says that “a good retail credit card is hard to find,” adding that “many store credit cards are skimpy on the benefits and loaded with high interest rates.”

Now, to be honest, some retail credit cards do have some benefits to consumers who shop at their store often. Perks like discounts, rewards and special sales for cardholders, and introductory interest rate of 0%, make them very appealing.

The catch however is when you don’t pay your retail credit bill in full at the end of every month or if you happen to miss a payment. As noted in the example above, the interest rates you’ll pay on your typical retail credit card are phenomenally high and, if you miss a payment, you can expect severe penalties.

According to CreditCards.com, the 5 retail credit cards with the worst APRs are, in alphabetical order;

  1. My Best Buy Preferred. Between 25.24 and 27.99%, depending on your particular credit score
  2. My Best Buy. The same as #1
  3. Office Depot personal credit. 27.99%
  4. Staples Personal Account. 27.99%
  5. Zales. 28.99%

Unless you’re a consumer pays off your retail credit card balance in full every month, a retail credit card is simply a bad idea. Unless you shop at the store very often and get a lot of different perks and discounts, their interest rates are so high that it makes any discount you might get negligible. Also, even if you do pay your balance in full and on time every month, it might make more sense to use a cash back card instead.

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