Stores offer big discounts on first purchases and months without interest on their credit cards.
If you’re not careful, however, you could find yourself with a heap of debt too.
The average retail card has an interest rate of around 26 percent. Some stores — including Zales and Staples — will charge you nearly 30 percent in interest each year, according to CreditCards.com, which recently studied the terms and conditions on dozens of store cards.
That’s a lot higher than the typical credit card rate of around 20 percent.
“They’re big money makers for the retailers,” said Ted Rossman, an industry analyst at CreditCards.com.
Indeed, Macy’s branded credit card accounted for nearly 40 percent of the store’s profit in 2016.
Bruce McClary, vice president of communications at the National Foundation for Credit Counseling, gave an example of how the cards can hit your wallet.
“Let’s say you were to charge $2,000 for a new game system, television and accessories,” he said.
Many retail cards come with an interest-free period, but assume that when it was over you still had a balance of $1,500 and the interest rate kicked in at 25 percent. If you make the minimum payments, you’ll shell out more than $2,800 over eight years. “That’s 1,382.94 in interest,” McClary said.
More from Personal Finance:
Wallet versus waistline: Here’s what consumers packed on this holiday season
If you have debt, avoid this big mistake many borrowers make
Before you pick a new credit card, check to see if it has this fine print
Still, half of Americans say they have applied for a retail card, according to CreditCards.com. Nearly 95 million people impulsively signed up for one at checkout. Store employees are often compensated if they’re able to rack up the number of people who say yes to these cards, Rossman said.
“There can be pressure to sign up for these in the moment,” he said. “Breathe a little and think about it for a few days.”