into any store during the holidays and the odds are good
that you’ll be pitched with a credit card offer. Need
an extra 15 percent or 20 percent off on the spot? Open
a credit card.
not so fast. A simple move to save money right now could
cost you a lot of money in the long run if you don’t
watch out for the hidden costs of those popular credit
cards offered at stores at the mall.
peak shopping seasons, such as Christmas or
back-to-school, consumers are more likely to open a
retail-label credit card, said Michael Moeser, director
of payments practices for Javelin Strategy &
summer’s peak driving season, by contrast, we’re
tempted to open a gas-related credit card.
key features of store credit cards resonate with
shoppers: Consumers can get an extra credit line to
spend more money on gifts. And there’s that added
savings on top of already discounted prices.
year is no different than years past where the instant
discount at the point of sale is the most compelling
draw to sign up a consumer," Moeser said.
retailers even go so far as to offer that extra discount
beyond just one day of shopping he said
what could rip into your wallet here?
is not exactly a cheap way to borrow: Don’t dwell on
the 15 percent or 20 percent discount you’d get at the
store if you open up the card.
take a hard look at the interest rate you’re going to
face on a store brand credit card if you don’t pay off
all those gifts when the bill comes.
looking at a 25.99 percent annual percentage rate on an
Ann Taylor credit card or a J.Crew card. A Carson’s
card has an APR of 24.99 percent.
average APR on a store credit card is 28.26 percent —
compared with 26.72 percent a year ago, according to a
survey by WalletHub. Rates are typically variable and
will go up when the prime rate increases. The prime rate
will go up again if the Federal Reserve raises rates, as
expected, this month. Other rate increases are expected
contrast, the average rate on credit cards issued by
banks or credit unions is around 16.5 percent, according
to CreditCards.com. Some consumers who shop around and
have good credit can find credit cards with rates around
10 percent or lower.
just doesn’t make sense to pay 25 percent on a card to
save 15 percent on a purchase," said Matt Schulz,
senior industry analyst for CreditCards.com.
store-branded credit card is a really bad choice, he
said, for anyone who can’t pay off the bill in full
Late fees can make a discount meaningless: Say you save
15 percent on a $200 purchase, or $30. If you’re going
to have trouble making payments on time, you could face
a late payment penalty of $27 or more.
for some store credit cards indicate that the late
payment fee can be up to $38, especially if you make
repeated late payments.
for the Kohl’s credit card, for example, note that the
late payment is $27, if your balance is over $50. Your
late payment fee will be zero if your balance is $15 or
less or $15 if your balance is over $15 but less than
$50.01. The late payment fee will not exceed the amount
of your minimum payment due.
the Kohl’s terms note that if you pay late and then
pay late again in any of the next six consecutive
billing cycles, the late payment fee will be up to $37.
That $37 fee would be charged until you make the minimum
payment on time for six consecutive billing cycles.
the fine print.
pay attention to when the bills come due. It’s way too
easy to lose track of a bill — especially if you use a
credit card only for a specific store every once in a
Spending more money does not mean you’re saving money:
One goal retailers have when they issue you a
store-branded credit card is that they’re trying to
turn you into a more loyal customer. They track your
spending — and bombard you with sales and deals via
e-mail or regular mail throughout the year.
can e-mail offers to you, which means you may end up
spending more money because you purchase items on
sale," said Bill Hardekopf, CEO of LowCards.com.
store cards offer rewards or points, which you can use
when you buy more things at that specific retailer, so
the spending cycle continues.
you think you’ll be too tempted to overspend in 2018,
do you really need another reason to spend?
An "interest-free" offer on a store card can
be tricky: Getting a discount on your purchases for
opening up a credit card in a store can work out just
fine, especially for consumers who will pay the bill on
time and in full. Private label cards that some experts
favor include Kohl’s and Amazon Prime.
consumers can be misled by "special financing"
offers for larger purchases, — which usually are a
deferred interest trap, according to WalletHub analyst
Consumer Financial Protection Bureau said this year that
some special financing promotions may shock consumers
with high, retroactive interest charges after the
promotional period ends. The watchdog bureau suggested
that companies consider using promotions that carry less
risk for consumers.
0 percent credit card offer has a set promotional
period, maybe 12 months or longer, where interest does
not build at all.
with some interest-free offers, consumers must pay off
the bill by a set date. If the bill isn’t paid in full
by that date, consumers may find that they owe a large
amount of interest that has been accruing since the date
federal consumer watchdog agency noted that the interest
rate on these cards is generally about 25 percent, so
the interest owed can be substantial.
key point: Many times, a minimum payment is required
during the "same-as-cash" period. If the
minimum payment is late, the borrower might no longer
qualify for a "no-interest for 12 months" type
The minimum payment alone may not be enough to pay off
the balance by the end of the period.
need to pay attention to the specific date a promotional
or deferred-interest period ends.
Open too many new cards at once and your credit score
will suffer: In general, store credit cards tend to have
more lenient approval requirements and can be easier for
a consumer to open than a bank-issued credit card,
according to WalletHub.
going to every store and opening a new card this holiday
season can drive your credit score down — which could
create problems if you were planning to take out a car
loan or a mortgage next spring.
they open too many new accounts at once, it will
negatively affect their credit scores," Moeser
risk: Many times a store card might come with a $500 or
$1,000 limit, so if you spend too close to that limit,
you’d damage your credit score, as well.
money at the checkout is one thing but make sure you don’t
trigger all sorts of other costs.