Why You Should Think Twice About Getting That Retailer Credit Card on Black Friday
Main points
- Retailers tend to increase their efforts to open store credit cards during the holidays, said consumer finance expert Chuck Bell.
- These cards typically have higher interest rates and higher late fees than traditional credit cards.
- People are opening fewer private-label credit cards, but retailers still rely on them to bring in revenue.
While you’re holiday shopping, you might want to sign up for store credit card When you listen to the cashier talk about how much money you can save by buying one.
But even if you sense the person behind you getting antsy, it pays to think through the details, experts say. The deal may not be as smooth as it seems at first glance.
“You may qualify for some discounts or promotions,” said Chuck Bell, director of advocacy programs at Consumer Reports. “But because the interest rates and late fees on these cards are so high, if you happen to miss a payment, you don’t have to spend much to save money.”
People are getting fewer store credit cards, according to research from credit reporting agency Equifax. Equifax said the number of these so-called private label cards opened in the first half of 2024 fell by more than 18% compared with the same period last year.
But retailers still rely on them for revenue. Bell said the holidays are prime time for retail credit card promotions as stores anticipate More foot traffic. When a salesperson starts telling you about their store card, here are a few things to keep in mind.
They may have higher interest rates and late fees than other credit cards.
The cost of missing a payment or racking up a balance can be higher with store cards, Bell said.
According to Bankrate’s analysis, the average interest rate on retail credit cards is 30.45%. Approximately 24.62% of the broader credit card market, According to analysis by Investopedia.
Meanwhile, late fees could be as high as $41, according to terms and conditions posted on Macy’s, Burlington and Petco’s websites. However, the average late fee for all credit cards is $32, according to the U.S. Consumer Financial Protection Bureau.
The opposite is also true: Retailer cards are traditionally easier to qualify for than other cards, Bell said, so they may rely more on interest and late fees to protect against losses.
Unexpected behavior may occur with these cards.
Bell urges people to check if a retailer’s card can only be used in its stores or if it is accepted by most merchants. He says it’s easy to forget about cards you only use occasionally and miss out on paying with them.
He also reminded consumers to look out for credit cards with deferred interest policies. These cards may have no interest for six months or a year. But if you miss a payment or don’t pay off your entire balance during that time, interest could be retroactive to that introductory period, he said.
You may have other options.
If you’re on a tight budget, consider a traditional credit card with a more “reasonable” interest rate, Bell says. credit union He said it could be a good place to get a new card because they use interest payments to lower costs for other cardholders.
Many merchants offer buy now, pay later (French national oil company) options available at checkout. These allow people to take items home while continuing to pay in fortnightly or monthly instalments. BNPL providers such as Klarna, Affirm and Afterpay may offer other interest-free products directly to consumers. (Holidays are also considered vital To BNPL Corporation. )
Bell said these fintech companies may offer “pretty good deals” on interest, adding that they may still charge late fees.