While the coronavirus pandemic has caused record levels of unemployment, that doesn’t seem to be keeping Americans from doing what they do best. Buy more stuff! While much of the shopping has moved online, people are still spending and using credit cards for those purchases.
Most of my credit card spending is focused on earning points and miles, although I’ve added more cash-back cards to the mix while we’re not traveling. When it comes to the other types of cards available, I’m admittedly not up to date on the other offerings out there. That includes the expansive world of store credit cards.
These are the credit cards that sales clerks offer when you’re checking out. There’s usually an offer for a discount on the purchases you’re making that day, which, depending on the size of your purchase, may seem like you’re getting a good deal. Trust me; you are not getting a good deal.
That’s not keeping people from signing up for these cards in record numbers according to a survey from CompareCards by LendingTree. Respondents say that 44% of them plan to apply for a store credit card this holiday season. This is bad news for them since 56% of people who have previously signed up for a store card has regretted getting one.
People may be looking to store credit cards this year because they’re often easier to get than a regular credit card. A store is willing to give you credit if they think it will make you more likely to buy things from them. Unfortunately, the average APR for store credit cards is currently 24.24%, which is amazing since we’re in a time of record low-interest rates. Making things even more painful is that over half of those who use a store credit card have a balance on the card. Ouch.
Store credit cards have branched out and now offer Visa/Mastercard/AMEX versions that you can use anywhere and earn store rewards. Most of these cards offer a 1% back in rewards on all purchases. This is much like the Disney Visa card which is great for the benefits but not great for earning rewards. Some store cards will give you a larger bonus for purchases at their locations.
Before you sign up for a store credit card this season, why not look for a card which will pay you larger returns for all of your purchases. There are many no-annual-fee cards out there which pay cash-back of 1.5 to 2%.
If you have good credit and plan on paying off your bills each month, getting 10% in rewards when buying a PS5 with the Best Buy credit card might sound like a good deal. However, a store card can keep you from getting a better travel credit card down the road. Wouldn’t it hurt if in 18 months you’re unable to get a 100,000 bonus from Chase because you’re over 5/24 from the card you signed up for to save 10% on a single purchase at Bass Pro Shops?
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This post first appeared on Your Mileage May Vary