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With approaching holidays season, you may want to apply for a store credit card. Or you may have even been offered at least a few retail credit cards at checkout. Be aware, however. Much as store credit cards may have enticing benefits, they often come with a high interest rate.
Until recently, the highest interest rates of retail credit cards were below 30%. In fact, a 29.99% APR was an artificial barrier that a few dared to cross. However, the Fed's series of interest rate hikes over the past year and a half has taken its toll.
The average interest rate of store credit cards has almost reached 30% APR this year. In fact, some store-only credit cards can charge interest that is above 30% APR. For example, the Good Sam Rewards Credit Card charges an enormous 33.24% APR, one of the steepest among store-only credit cards.
The situation is a bit better with co-branded store credit cards that have Mastercard or Visa logo on them. For example, the same Good Sam Rewards card that has a Visa logo may charge a rather low 22.24% APR. With co-branded cards, your interest rate mostly depends on your credit score and creditworthiness.
However, some store cards charge high interest rates regardless of your credit rating. For instance, the Target Mastercard and Target Credit Card charge the same 29.95% APR whether your credit is good or bad.
While store credit cards may look like a good deal at first, they end up being very expensive. In comparison, the average interest rate on general-purpose credit cards is 21.19%, and it's 22.77% with consumers who carry a balance. The difference is noticeable. You might want to consider traditional credit cards that have a 0% intro APR period, earn you cash back rewards, or have travel benefits.
