SAN FRANCISCO (CBS 5) — The holidays are here and retailers are trying to cash in by offering a discounts if consumers open a store credit card. While that may sound like a good idea, consumers should know what they are getting into.
Adam Levin from Credit.com said store credit cards often include high interest rates.
“My bet is there are more people in stores hawking credit cards for the stores, than may even be hawking merchandise,” said Levin.
CBS 5 ConsumerWatch took a look at a few credit card interest rates, here is what we found:
-Radio Shack came in at 28.99%.
-Best Buy and Staples who offer an interest rate of 27.99%
Nationwide the average interest rate on a store card is more than 20 percent.
But these three stores came close to nearly 30 percent. Nearly double the interest rate on average credit card.
A New York lawmaker is trying to make the high price of store credit clear. He wants to force stores to post their credit card interest rates along with grace period and annual fees right at the register. But it’s not just the high interest rate that can hurt consumers. Every time a new account is opened your credit score takes a hit.
“It’s a red flag and they’re going to look at you more closely and they’re wondering why you are going to so many places to get credit,” said Levin.
Still, store cards have some benefits. Many retailers offer a one time discount for new accounts. At Banana Republic there is a 40 percent discount on outwear if consumers open a new account. For some consumers those discounts may come in handy this holiday season. Just don’t forget to pay off the balance before the grace period is up.
“The money you save today could come around and haunt you if you run a balance,” said Levin.
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