From one-time discounts to generous cash back offers, retailers often seek to entice customers to purchase their own branded credit cards. These can help stores encourage loyal customers by getting them to come back and spend more money, but they are known to offer less than stellar terms.
While the average non-commercial credit card has an APR of 19.92%, the highest retail card APR of 2021 is 29.99%, offered by retailers such as Big Lots, Guitar Center, and Kay Jewelers. , according to a study by CreditCards.com, which examined credit. card offers from the top 100 retailers in the United States that offer their own cards.
These cards can be hard to avoid: 7 in 10 customers who signed up for retail cards did so on impulse at checkout, according to a survey of 2,226 American adults conducted by CreditCards.com September 15-17.
Not only are customers a “captive audience” in the checkout line, these cards are attractive right now because they often offer a discount on the purchase you’re about to make, says analyst Ted Rossman. industry leader CreditCards.com. . In fact, more than half of all people who applied for a retail card were drawn to a discount or promotion offer, according to the survey.
“The store is looking to build loyalty,” says Rossman. “They often offer better rewards when shopping in their own stores [than at other retailers]. “
But these rewards can distract you from the fact that, overall, the card might not be that good.
Beyond high interest rate considerations, Rossman says consumers should consider the opportunity cost of signing up for a retail card versus an all-purpose card from an issuer like American Express or Visa. An all-purpose card may not provide the same reward at the time, but may provide better benefits overall.
“The best cards issued by banks usually require you to spend a few hundred or a few thousand dollars in the first few months to get their signup bonus,” he says. “Even if a store gives you rewards, is the long term benefit of the card as good as putting the exact same purchase on a general purpose card? “
People who tend to have a balance should ignore retail cards altogether, Rossman says. Some retail cards offer 0% interest for a certain period, but then charge deferred interest payments if the card is not redeemed at the end of the trial offer, which Rossman calls “a tactic. particularly nasty “.
Consumers should also keep their credit score in mind when considering whether or not to purchase a retail card. While a rebate offer might be tempting, it might not be worth it as it causes a temporary slash in your credit score when you apply.
But more than anything, Rossman says it’s the interest rates that customers should be worried about.
“I would say it almost doesn’t matter if we’re talking 30% or even 25%,” he says. “These rates are really high and I would advise people to avoid them if possible.”
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