Holiday shoppers, avoid store credit cards



As holiday shoppers head to stores in search of Black Friday deals, they’ll hear the familiar talk: Would you like to save an extra 10% on your purchase today by opening a new credit card?

A hanging discount at checkout is always tempting. Nearly 70% of shoppers who asked for a private label card say they did so on impulse. The clash of holiday stickers can make that 10% (or more) discount even more enticing.

And while these credit cards have become less popular in recent years, higher prices and tighter finances could persuade more buyers to give them a different look. A recent survey by shows that more than a third of Americans say they are at least somewhat likely to request a retail branded card this holiday season. Of those earning at least $100,000, nearly half say they are likely to apply.

It is therefore worth warning you about what you are actually subscribing with these credit cards.

Most retail branded credit cards charge a single interest rate so they can be offered to all shoppers, regardless of income or credit score, along with relatively simple eligibility requirements. The average rate on a retail credit card is currently 26.72% (a record) while a general credit card is around 22.66%.

The average price for a so-called store-only card, which can usually only be used at one retailer, is even more expensive, hovering around 28%.

Some retailers, such as Dick’s Sporting Goods Inc., charge a whopping 30% when you carry a balance on any of their offered cards, and a handful – including furniture retailer Wayfair Inc. and retailers Bloomingdale’s and Macy’s Inc. – have cards with rates even beyond that.

And unlike regular credit cards, retail credit cards often do something sneaky called deferred interest, which means that if a buyer doesn’t pay off the balance within the promotional window of, say, six months, the interest is evaluated retroactively from the date of purchase. A 2015 analysis by the Consumer Financial Protection Bureau showed that a large portion of consumers paid off their balance soon after being hit by retroactive interest, indicating that they did not understand the conditions when registering.

Even shoppers with the means to pay off balances in full should remember that there is an opportunity cost to signing up for a store brand card rather than a general purpose card. The latter is likely to offer you a more generous sign-up bonus, cash back or travel rewards, according to Ted Rossman, senior industry analyst at

You will also need to be wary of how opening a retail credit card can affect your credit score. Open too many cards at the same time and you risk getting stunned. Retail cards also often have lower credit limits. If you only have one or two cards and your balances are close to the limit, your credit utilization rate (in other words, the total amount of credit you use and have available) will be high. , which can also negatively impact your score.

Still, there are a few retail credit cards that may make sense for loyal customers. Inc. offers a co-branded card with Visa that gives Prime members 5% back when they make purchases at Amazon or Whole Foods, plus a lower percentage for spending on gas and dining. Best Buy Co. and Costco Wholesale Corp. have their versions that also offer cashback.

If you consistently shop at these retailers and are able to pay the balance in full, it may be worth it. Likewise, if you know you’re going to make a major purchase, like new kitchen appliances, getting the 10% or 15% discount up front can pay off – again, provided you don’t have to carry a big balance.

Sometimes loyalty comes with perks, but more often than not store credit cards end up costing you more.

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This column does not necessarily reflect the opinion of the Editorial Board or of Bloomberg LP and its owners.

Alexis Leondis is a Bloomberg Opinion columnist covering personal finance. Previously, she oversaw tax coverage for Bloomberg News.

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