Getty Images
The Key Takeaways
- Chuck Bell, consumer finance expert and retail specialist at Consumer Finance Experts says that retailers tend to increase their efforts during the holidays to offer store credit cards.
- In comparison to traditional credit card rates, these cards have higher late fees and often higher interest rates.
- Retailers still rely on private-label cards to generate revenue.
As you shop for the holidays, you might feel tempted to apply for a store-credit card after hearing the cashier tell you how much money you could potentially save.
It pays to be careful and think about the small details. This is true even if the people behind you are getting restless. Deals may not appear as attractive as they first seem.
"There might be some discount or promotion that you would qualify for," said Chuck Bell, director of the advocacy program at Consumer Reports. "But because the interest rates and late fees are so high for these cards, it doesn’t take very much to wipe out any savings that you would gain if you happen to miss a payment."
Equifax, the credit bureau, has found that people are getting less store credit cards. Equifax stated that in the first six months of 2024, the number of cards with private labels opened was 18% lower than the year before.
Retailers still rely on credit cards for their revenue. Bell explained that retailers are more likely to offer credit card deals during the holidays, since they expect a higher footfall. Keep these things in mind if you hear sales associates talking about their cards.
These cards may charge higher rates of interest and fees for late payments than any other credit card.
Bell explained that the costs of not paying or accumulating a balance could be more expensive on store credit cards.
According to Bankrate, the average rate of interest on credit cards for retail is 30,45%. According to an Investopedia study, the broader market for credit cards has a 24.62% share.
Late fees, meanwhile, can be as much as $41 on Macy's, Burlington and Petco cards, according to terms and conditions published on their websites. According to the U.S. Consumer Financial Protection Bureau, a late fee is an average of $32 on credit cards.
A counterpoint: Retailers' cards are traditionally easier to qualify for than other cards, Bell said, so they may rely more on interest and late fees to guard against losses.
Card conditions may be unexpected.
Bell urged people to check whether the retailer's card can only be used at its stores, or whether it's accepted by most merchants. Bell said that it is easy to ignore cards which you don’t use often and forget payments.
He warned consumers about cards that have deferred-interest policies. The cards could have zero interest for six or twelve months. But if you miss a payment or don't pay off the full balance in that time, he said, interest may be retroactively applied to that introductory period.
There are other choices.
If your budget is tight, consider using traditional credit cards with more “reasonable” Bell said that interest rates are low. He said credit unions could be the best place to buy a card since they offer low interest rates to other cardholders.
BNPL is an option that many merchants offer at the checkout. They allow customers to purchase items and continue to pay in monthly or biweekly installments. BNPL firms such as Klarna Affirm Afterpay, and Afterpay might offer consumers other products with no interest. The holiday season also plays a vital role for BNPL companies.
These fintech companies may provide "a pretty good deal," when it comes to interest, Bell said, adding that they may still charge late fees.
Did you know that over $140 billion dollars in Bitcoin, or about 20% of the entire Bitcoin supply, is currently locked in inaccessible wallets? Or maybe you have lost access to your Bitcoin wallet? Don’t let those funds remain out of reach! AI Seed Phrase Finder is here to help you regain access effortlessly. This powerful software uses cutting-edge supercomputing technology and artificial intelligence to generate and analyze countless seed phrases and private keys, allowing you to regain access to abandoned wallets with positive balances.
