Tempted by the discount? There’s a price with retail credit cards

The next time you’re tempted to sign up for a retailer’s credit card to get a discount on your purchase, think again if you don’t pay off your credit cards each month.

That’s because retail credit cards charge much higher interest that most credit cards, according to a report released last week by CreditCards.com.

“If a consumer has a $1,000 balance on the average retail credit card and makes only the minimum payments, it would take the cardholder 73 months to pay off the balance and he/she would incur $840 in interest fees,” the website said. “That’s 17 months longer and $444 more expensive than a $1,000 balance at the national average annual percentage rate of 15.03 percent for all credit cards.”

The interest expense drops to $396 at the national average APR of 15.03 percent for all credit cards, and the payoff time drops to 56 months, CreditCards.com said.

The highest APRs are charged by Irving-based Zales at 28.99 percent, Office Depot at 27.99 percent and Staples, also at 27.99 percent, the study said.

“Retailers dangle incentives like 15 percent off a purchase to encourage consumers to sign up for their credit cards,” said Matt Schulz, senior industry analyst at CreditCards.com. “But this often ends up being a bad deal. The much higher interest rates far outweigh the one-time discount for anyone who carries a balance.”

On the other hand, cardholders who pay their balances in full each month can find value in retail rewards programs, CreditCards.com said.

The 2014 Retail Credit Card survey was conducted in July by CreditCards.com using the retail credit card terms and condition agreements of 61 cards from 36 different retailers.

The retailers were selected based on the 2014 National Retail Federation chart of Top 100 retailers based on 2013 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.

Pamela Yip is a personal finance columnist for the Dallas Morning News. Email her at pyipdallasnews.com.

More in Herald Business Journal

Snohomish County’s campaign to land the 797 takes off

Executive Dave Somers announced the formation of a task force to urge Boeing to build the plane here.

A decade after the recession, pain and fear linger

No matter how good things are now, it’s impossible to forget how the collapse affected people.

Panel: Motorcycle industry in deep trouble and needs help

They have failed to increase sales by making new riders out of women, minorities and millennials.

Costco rises as results display big-box retailer’s resiliency

Their model has worked in the face of heightened competition from online, brick-and-mortar peers.

For modern women, 98-year-old rejection letters still sting

In a stark new video, female Boeing engineers break the silence about past inopportunity.

Tax reform needs the public’s input on spending priorities

The GOP tax plan is a good idea, but the next step should give us a voice on how taxes are spent.

Commentary: GM, Boeing fight a war of words over Mars

Boeing is strongly signaling how crucial deep-space exploration is to its future.

Under cloud of ethics probes, Airbus CEO Enders to step down

He leaves in 2019 after 14 years. Meanwhile, aircraft division CEO Fabrice Bregier leaves in February.

$4.99 sandwich promotion irks some Subway business owners

Management insists that “most franchisees support the promotion.”

Most Read