By Stephanie Miller


5 Min. To Read

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We’ve all been there. You lug all of your new purchases to the register, watching the total climb higher and higher, when the clerk offers you an enticing offer to “save 20% on your purchase today.” The only catch? You have to apply for the store’s branded credit card.

You might even consider it this holiday season. What could be the harm, after all? Maybe you plan to pay off today’s balance – happily skipping away with your 20% savings – and never touch the card again. Surely that’s a smart idea for a savvy money-saver like you. Well, maybe not. In the end, it really depends on which card you’re considering and how that account will impact you in the future.

How Likely Are You to Pay It Off?

That purchase today may be a great deal, what with your promotional coupon offer – but if you don’t pay off the balance in full, the interest charges can quickly negate any savings.

The average retail credit card interest rate is currently around 25 percent. Compare that to the overall credit card average rate of just over 15 percent, and you can see how it’s easy to rack up a fair amount in fees. In fact, you might pay significantly more for that winter coat and big screen television by putting it on the store’s credit card than you would have paid just buying it in cash, sans coupon. While 25 percent is the average, some companies even charge significantly more. Zales, a popular jeweler (especially around the holidays) has a whopping 29.99 percent interest rate attached to their branded card. And Macy’s, one of the largest department stores in the country, charges almost 27 percent.

If there’s even a chance that you won’t pay off the card in full right away, and there’s not a 0 percent interest promotional period offered, don’t even apply. Find coupons online, sign up to receive the store’s emails, and shop big sales – you’ll thank yourself later.

What Are the Promotional Interest Periods?

Speaking of 0 percent interest, you’ll still want to keep an eye out if your card does include this tempting offer. In addition to savings on your first purchase(s), some retail card products also come with anywhere from six to 18 months of no interest. This can be quite the enticing offer -- after all, you have even more time to pay off holiday purchases and avoid interest!

Be careful, though. Some promotional periods include a doozy of a caveat in their fine print: the interest is actually deferred. If you don’t pay off the entire purchase by the end of your promotional period, you’ll have to pay all of the interest accrued up to that point. Sure, you may have 12 months’ worth of interest-free payments on that new living room set. But if you fail to close out the entire purchase before the end of the 12 months, you can expect to see a big jump in your balance owed on month 13 (when they add all of that deferred interest back in).

Do Other Cards Offer More?

Depending on the other credit cards you carry, you may want to forgo a new store credit card simply because you’ll miss out on available perks.

For instance, if your everyday credit card offers rewards at a high enough rate, it may be worth building those with your holiday purchases, rather than putting them on a new retail card. Between the cash back or points earned and redemption bonuses, it might be more valuable to you in the end.

Or, if you have a card like the Citi Double Cash, you may want to opt to put all of your spending there in order to take advantage of purchase protection. Not only does this card (and many other like it) offer protection on the purchase itself – extending warranties and protecting your item from damage/loss/theft – but you can also benefit from price protection. If the cost of your item drops, even after the holidays pass, you could see a credit on your next billing statement for the difference. It’s hard to find a retail credit card that beats these kinds of perks.

Is There an Annual Fee?

If you’re thinking about getting a retail credit card for short-term savings, be sure to ask if there’s an annual fee.

Most store cards are annual fee-free, which is great. However, if you come across one that does charge its members a fee once a year, you’re looking at a card that could end up costing you money to carry.

Do You Have Any Big Plans for Your Credit?

Lastly, if you are looking to do anything notable with your credit in the near future, you should avoid opening any new accounts – especially retail credit cards that offer little beyond the promise of a discount.

If you’re planning to buy a home in the next year or two, for example, it’s important to build your credit score as high as possible. Opening a new store account will immediately ding you in a number of ways: you’ll raise your number of recent hard inquiries, you’ll drop your average age of accounts, and you may even increase your credit utilization, depending on what you charge to the card. If you have any credit score-dependent plans coming up, stay away from the credit card applications. Saving 20 percent on your purchase today isn’t worth paying an extra half a percent on your new mortgage.

Some retail credit card products have great perks and, depending on your shopping habits, may be an excellent choice. Be sure to weigh the benefits, though, and read through the fine print before signing that application at the register.

We’ve all been there. You lug all of your new purchases to the register, watching the total climb higher and higher, when the clerk offers you an enticing offer to “save 20% on your purchase today.” The only catch? You have to apply for the store’s branded credit card.

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