AUSTIN, Texas, Oct. 15, 2015 /PRNewswire/ -- Shoppers should steer clear of store-branded credit cards if they plan to carry a balance because the average retailer's credit card charges a hefty 23.43% interest rate, according to a new CreditCards.com report.
That's much higher than the national average for all credit cards (15.00%). The retailers that charge the highest APRs are Zales (28.99%) and Staples (27.99%). Two-thirds of retail-branded credit cards charge all cardholders an APR of 19.99% or higher.
There are 16 retail cards with a lowest-possible APR under 16.00%, depending on creditworthiness (the lowest flat-rate APR is the Military Star card at 10.24%). But for the most part, these cards' APRs should be a sign for many cardholders to stay away.
"If you regularly carry a balance, retail credit cards just aren't for you," said Matt Schulz, CreditCards.com's senior industry analyst. "Even with potential rewards and discounts, the math just doesn't work in your favor when interest rates are that high, so your best move is to shop around for lower-cost options."
If you do pay your balance off every month, however, there are deals to be found. CreditCards.com surveyed the 100 largest retailers and found that about 70% of those that offer branded credit cards try to entice shoppers with discounts.
- Most of the discounts apply to the first purchase, but about one in three discounts are designed to keep cardholders spending (for example, a gift card mailed to the cardholder's home for a future purchase).
- Consumers who keep spending may also be able to reach thresholds that grant them access to more perks. CreditCards.com found 12 cards that reward long-term, loyal customers in this fashion.
The problem is that any discount that you receive from your retail credit card won't matter much if you're not paying your balance off each month.
- If a consumer has a $1,000 balance on the average retail credit card and makes only the minimum payments, it would take him or her 72 months to pay off the balance and he/she would incur $833 in interest fees.
- The interest expense drops to $370 at the national average APR of 15.00% for all credit cards. And the payoff time drops to 54 months.
- At the average low-interest APR of 11.62%, the interest falls to $257 and the payoff time shrinks to 50 months.
Store cards can be a decent choice for people who are rebuilding their credit or just getting started with credit. People with good credit who are searching for a new card might be better served by a general-purpose rewards card, such as the Citi Double Cash card or the Capital One Venture Rewards card.
If you are interested in a store card, don't be pressured into making a quick decision. When offered the card, ask for a brochure instead, then go home and read the details. If it still sounds like a good deal after reading the fine print, apply the next time you're in that store. Chances are that all of those perks you liked will still be there, and most important, you'll make a more informed decision.
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The 2015 CreditCards.com Retail Credit Cards survey was conducted in October 2015 by CreditCards.com using the retail credit card terms and condition agreements of 64 cards from 42 different retailers. The retailers were selected based on the 2015 National Retail Federation chart of Top 100 retailers based on 2014 sales. All retailers from that database that offer a retail credit card program were selected for study. Collected data points included APR, rewards program details, introductory offers, co-branded partnerships, number of cards included in programs and their names.
The 2015 average APR was determined using the APR data listed in each card's terms and conditions document. APRs noted as ranges to be issued based on applicant's credit were averaged and then the averages of those ranges were used in a standard average formula comprised of 61 numbers (less two debit cards and one other credit card with an unlisted APR).
CreditCards.com, named a "Best Site for Managing Your Credit" by MSN Money, is a leading online credit card marketplace, bringing consumers and credit card issuers together. At its free website, consumers can compare hundreds of credit card offers from America's leading issuers and banks and apply securely, online. CreditCards.com is also a destination site for consumers wanting to learn more about credit cards. Offering advice, news, features, statistics and tools, CreditCards.com helps consumers make smart choices about credit cards. In 2014, over 22 million unique visitors used CreditCards.com to find the right credit card to suit their needs.
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