ShopSmart Shares the Rewards (and Risks) of Store Cards

YONKERS, N.Y., April 9, 2012 /PRNewswire-USNewswire/ -- Retailer credit cards can have big payoffs or pitfalls, so it's important to understand new twists and terms before you sign up.  The May 2012 issue of ShopSmart magazine, from the publisher of Consumer Reports, takes a close look at new card offerings including store debit cards and lower interest rates, as well as a sampling of generous store cards and the benefits they offer.                                                                  

"Retailer cards are very tempting – it can be hard to say 'no' when you're standing at the register and the clerk tells you about a sign-up discount and hands you a card application," said Lisa Lee Freeman, editor-in-chief of ShopSmart. "But it's important to understand exactly what it is that you're signing up for. We took a look at some new offerings and their gotchas and compiled a list of some very generous cards."

What's New in Store Cards

Retailer-branded debit cards.  The first store cards were charge cards that could be used only at the retailer that issued it. Next, many retailers started issuing cobranded credit cards that can be used anywhere, and they let you earn points on all of your purchases. Now some retailers, such as Nordstrom and Target, offer a store debit card, which links to your checking account.

What you need to know: You probably don't want to get one of the new cards if you often overdraw your account and rely on your bank's overdraft-protection program. If you go over your balance using a retailer's debit card, you'll not only owe a fee to that retailer but you'll owe one to your bank. To avoid the fee frenzy, opt out of your bank's debit overdraft protection. If you go over your balance, your transaction will simply be rejected.

Lower interest rates.  Although interest rates on many store cards used to be sky-high, some are now lower than the average bank credit-card rate, which was recently about 14 percent.

What you need to know: Those low rates are only given to the most creditworthy customers. If your credit is less than stellar, you could be charged 20 percent or more.

Cards that finance only big purchases.  These cards are issued by home-improvement and electronics stores, such as Amazon.com, Apple, Best Buy, Home Depot, and Lowe's. Most offer from six months to a year of 0 percent financing on your purchase, though some go even longer.

What you need to know: These cards will help you spread out payments, which might be less of a budget buster. The catch: If you don't pay the entire balance by the end of the interest-free period, you'll be charged interest retroactively to the date of purchase.

Fantastic Plastic

Below is a sampling of some of the store cards highlighted in the May issue of ShopSmart and some of the benefits they offer. Keep in mind that perks can depend on how much you spend and the interest rate might vary given your credit worthiness. Read the agreement, and be selective, especially if you are about to apply for a loan. Signing up for too many cards can ding your credit score.

Best Cards for Cash Back

Costco American Express
APR: 0 percent for 6 months, then 15.24 percent.
Perks: 3 percent back on gas purchases up to $3,000 a year, 1 percent on higher amounts; 2 percent at restaurants, and 1 percent on other purchases, including at Costco.

Amazon.com
APR: 13.24, 18.24, or 21.24 percent.
Perks: $30 sign-up bonus. Three points back on your Amazon purchases, two points back at gas stations, restaurants, and drugstores; one point elsewhere. Take rewards as cash back, gift cards, or in Amazon points.

Best Cards for Discount Shoppers
JCPenney: APR: 26.99 percent.
Perks: 20 percent off your first purchase. One point for every dollar spent. Monthly double-point bonus events.

Target
APR: 22.9 percent.
Perks: 5 percent off every time you shop. Extra prescription discounts. After filling five prescriptions, coupon for 5 percent off a future shopping trip.

About Consumer Reports:
Consumer Reports is the world's largest independent product-testing organization. Using its more than 50 labs, auto test center, and survey research center, the nonprofit rates thousands of products and services annually. Founded in 1936, Consumer Reports has over 8 million subscribers to its magazine, website, and other publications. Its advocacy division, Consumers Union, works for health reform, food and product safety, financial reform, and other consumer issues in Washington, D.C., the states, and in the marketplace.

About ShopSmart magazine:
Launched in Fall 2006 by Consumer Reports, ShopSmart draws upon the publication's celebrated tradition of accepting no advertisements and providing unbiased product reviews. ShopSmart features product reviews, shopping tips on how to get the most out of products and "best of the best" lists. It's ideal for busy shoppers who place a premium on time. ShopSmart has a newsstand price of $4.99 and is available nationwide at major retailers including Barnes & Noble, Wal-Mart, Borders, Kroger, Safeway and Publix. ShopSmart is available by subscription at www.ShopSmartmag.org.  

ShopSmart is available 10 times a year.

Subscribe at www.ShopSmartmag.org.

SOURCE ShopSmart