Home Credit card Why You Should Think Twice Before Signing Up For Store Credit Cards

Why You Should Think Twice Before Signing Up For Store Credit Cards

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SALT LAKE CITY — Sounds like a good deal — save 15%, 20%, even 30% on your purchases by signing up for a store’s credit card. As tempting as it sounds, you might want to think twice.

“A lot of us are going to hear that talk this year,” said Ted Rossman, senior industry analyst for CreditCards.com. “I would be very careful.”

We asked Rossman to detail the pros and cons of using a brand name credit card. Let’s start with really, the only pro. Yes, they can save you money on the spot and possibly on future purchases at their store.

“If it’s a store you love and you shop there all the time, and you pay in full and avoid interest, yes, then maybe it makes sense to get their card,” did he declare.

But there are potential downsides, the biggest being high interest rates. We’ve looked at the terms and conditions of a few popular chain store cards. Keep in mind that the average credit card interest rate currently sits at 19.04%.

If you want an Old Navy/The Gap card, expect an interest rate of 28.99%. Macy’s credit card will slap you with an interest rate of 29.74%. Meanwhile, the card offered by Dick’s Sporting Goods carries an APR of 29.99%.

And be especially wary of stores that offer credit cards with promises like “No interest for 12 months!” Usually this means deferred interest. In other words, you have 12 months to pay off the card, but if you hit 12 months and a single day, not only does the interest kick in, but they also retroactively charge you any interest that would have accrued for the L whole year.

“That’s a bad tactic that a lot of store cards do,” Rossman said.

Here’s another negative: Applying for a store credit card will hit your credit with serious demand that will temporarily remove it. Applying for multiple cards at the same time will cause your credit score to drop significantly. So you might want to sign up for just one card instead of a whole bunch.