Beware Of In-Store Credit Cards

October 15, 2019

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Some of the biggest shopping days of the year are rapidly approaching and retailers will take full advantage of every second of it.  You may find yourself tempted to get an in-store credit card, which can have its advantages, however with the average annual percentage rate (APR) for retail cards now stands at 26.01%, which can be a costly relationship. The average in-store credit card is around 5 five percentage points higher than the average credit card APR of 21.1%. Some retail cards prove more expensive than others. Store-only or closed-loop credit cards, which can only be used at that specific retailer, have an average APR of 27.52%, up 29 basis points from a year ago. Comparatively, co-branded cards with Visa, Mastercard, Discover or American Express, can be used at any retailer but are sponsored by a specific company, have a lower average APR of 23.39%, up 33 basis points from 2018. However with retail credit cards fairly easy to obtain and most in-store cards come with very low or no credit-score requirements, making it easy for retailers to issue the cards on the spot to shoppers when they’re at the cash register. The banks that issue these cards on behalf of retailers charge higher interest rates to offset the potential that someone who isn’t creditworthy could receive one of these cards. However, if consumers use these cards properly, they can be a useful tool for building one’s credit history. The key is to pay off the full balance on the card on time each billing cycle to avoid falling into a debt spiral thanks to the sky-high interest rates.

SOURCE: MarketWatch

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