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.

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