Skip to main content

As the holiday shopping season commences, stores will ramp up offers for shoppers to obtain their credit cards. Retail store credit cards are often very alluring with lucrative discounts on purchases, but the hidden costs can outweigh the benefits.

Retail credit cards often carry high interest rates, which can quickly rise toward 30%. While the offers are tempting for consumers to chase special discounts, the higher interest rates pose a risk and can undo any savings if the balance is not paid off quickly enough, said Bruce McClary, spokesman for the National Foundation for Credit Counseling, a Washington, D.C.-based non-profit organization.

“Some stores are offering deeper discounts for those using store-branded credit cards,” he said. “The days of needing a different card for each store are long gone. Many bank-issued cards have fixed interest rates which are much lower than retail credit offers.”

High Interest Rates Increase Debt Levels

Many shoppers are faced with carrying a balance each month because of other existing debt, and store-branded credit cards charge a hefty average interest rate of 23.43% making this an uneconomical option, according to a new report by, the Austin, Texas-based credit card comparison company. The report examined the retail credit card terms and condition agreements of 64 cards from 42 different retailers.There are two stores in particular to steer clear of because their credit cards charge the highest APRs: Zales at 28.99% and Staples at 27.99%. 

By contrast, the national average for all credit cards remains at 15.0%, much lower than the cards from retailers. 

Two-thirds of store credit cards charge all cardholders an APR of 19.99% or higher. “If you carry a balance regularly, retail credit cards just aren’t for you,” said Matt Schulz,’s senior industry analyst. “Even with potential rewards and discounts, the math just doesn’t work in your favor when interest rates are that high, so your best move is to shop around for lower cost options.”

Depending on your credit score, there are 16 retail cards with the lowest possible APR that is under 16%. Even those rates remain very high, and interest charges can add hundreds if not thousands of dollars to the balance, extending the amount of time it takes consumers to pay off the debt. Some retail credit cards such as Sears pose an even greater problem, because the interest rates remain the same for all customers, treating those with exceptional credit scores exactly the same as those who are below average, McClary said.

Sears offers three cards, and two of them, the Sears and Sears MasterCard cards, offer a whopping APR of 25.24%. Only the store's Home Improvement account offers 14.40% or 18.40% based on creditworthiness.

If you are still shocked by the Sears interest rate, you won’t find lower rates at JC Penney, who uses Synchrony Bank as its lender. The company's financing terms are not any better with an interest rate of 26.99 %.

“The thing about those interest rates is not the fact that they are so high, it’s that they are the same for everyone,” McClary said. “Those with excellent credit have no incentive to apply if they are going to be treated the same as someone at the other end of the spectrum.”

How Payment Amounts Are Affected...

When a consumer has a $1,000 balance on the average retail credit card and sticks to making only the minimum payments, it would take 72 months to pay off the balance while incurring $833 in interest fees, said Schulz.

The expense of the interest alone drops to $370 with the national average APR of 15.00% for all credit cards. The payoff time also drops to 54 months. When the average low-interest APR of 11.62% is applied to the $1,000 balance, the interest falls to $257 and the payoff time shrinks to 50 months.

Paying Your Bills on Time

While consumers should stick to a strategy of always paying their bills on time, the consequences for people who are drawn in by introductory rates is even greater. Failing to even pay one month’s bill on time could mean the tantalizing 0% is revoked, said Schulz.

“I don’t think most people realize that,” he said. “Even if you’re only in month one or two of a 15-month 0% introductory offer, that offer can be pulled out from under you if you’re late with a payment. That’s a big deal and can cost a consumer a lot of money.”

While consumers remain lured to the discounts, these reductions and rewards only really pay off if your balance is paid off each month, Schulz said.

“The truth is that these discounts and rewards can be a really great deal,” he said. “After all, it doesn’t make much sense to get a 20% discount if you’re still going to end up paying 25% interest on that purchase.” Store cards are not a bad option for people who are rebuilding their credit or just starting their credit history, Schulz said.

Consumers who have good credit, but are looking for a new card, should opt for a general-purpose rewards card, such as the Citi Double Cash card or the Capital One Venture Rewards card.

“If you are interested in a store card, don’t be pressured into making a quick decision,” he said. “If after reading the fine print it still sounds like a good offer, apply next time you’re in that store. Chances are that all of those perks you liked will still be there.”