Should You Avoid Using a Retail Store Credit Card for Your Holiday Shopping?

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Written by: Guest | Best Company Editorial Team

Last Updated: February 24th, 2020

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Guest Post by Nathan Grant

Though many of us have begun carving pumpkins and picking out spooky costumes, the one-two punch of Black Friday sales and the holiday shopping season is just around the corner and will soon have everyone reaching for their wallets. Spending smart is key to ensuring your first New Year’s resolution isn’t paying down credit card debt.

Whether you prefer to shop online or at a particular brick-and-mortar retailer, some retailers offer their own co-branded store credit cards, which can save you money as you shop through discounts, rewards, and more. 

Credit Card Insider recently conducted a survey of 3,771 retail store cardholders, and the results revealed some interesting insights on whether retail store credit cards are the right choice while they’re on the minds of many this holiday season.

40% of cardholders regretted getting a retail store credit card

Retail store credit cards typically offer incentives to attract applications. These may include discounts, rewards, sales, coupons, bonuses, gifts, or special financing offers that are usually available right away. It’s not hard to see why one might find these alluring, especially when you embark on holiday shopping — every penny saved can help.

The regret often comes in long after the benefits have been enjoyed. The APRs on retail store credit cards are typically much higher than other types of credit cards, often in the 25 percent to 30 percent range. If you aren’t a responsible borrower, this can put you in a worse position than you were in before you made your holiday purchases.

55% of cardholders paid interest charges for carrying a balance on a store credit card, with another 8% unsure if they had

If you’re carrying a balance on a credit card and high-interest payments are negating the discounts that you got for signing up, was it worth getting it in the first place? 

Often, customers make the decision to apply for retail store credit cards while they’re standing in line, which allows less time to think about the weight of their financial decisions and the financial fallout that could follow. Retail store employees could also feel pressured to push applications for their co-branded cards to hit quarterly goals, and that pressure can be passed onto you, the customer, even if sales reps aren’t acting maliciously.

The bottom line

Retail store credit cards require just as much consideration as any major financial decision. Be sure not to take them lightly, do your research, and make sure you understand the full terms so you don't find yourself regretting the decision down the line. If you frequent a particular retailer often and use their cards responsibly, you can use them to your advantage.

Interest can be avoided on any credit card if you pay the balance off in full and on time every month. If you’re confident that you can be responsible and keep your balances paid down, then you might be able to take advantage of a retail store card even if the interest rate seems a little high. 

If a retail card offers a 0 percent APR introductory period when you sign up, you could pay off the balance of your holiday shopping purchases interest-free during that time. However, even if this seems like a possibility for a card you might have your eye on, it’s imperative that you still read over the full card terms carefully. Some retail store credit cards list deferred interest as part of their special financing offerings. With deferred interest, if you pay late, or have any remaining balance at the end of the “no interest” period, even if it is just a dollar, you’ll be charged interest for the entire period on the initial balance you started with at the regular APR. 

Fret not, though. If you’re still looking to use a credit card this holiday shopping season, there are general cashback rewards cards out there that might have better rates and give you more perks and benefits than a retail store credit card.

Check out Credit Card Insider’s full survey results for other insights that might apply to your holiday shopping habits on the horizon.

Nathan Grant is a credit industry analyst at Credit Card Insider. He seeks to educate individuals and communities on money matters and stimulate financial awareness

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