INDIANAPOLIS — It never fails. You're checking out at a store, and a clerk offers you a discount if you apply for their store credit card. But is the savings worth it the signup?
Look at the different interest rates
Store credit cards often have a higher APR interest rate than a regular credit card. That means it's more expensive to borrow money if you don't pay in full.
Tedd Rossman with CreditCards.com said 29.99% was the highest they found.
"That was what everybody was offered regardless of credit quality. So, if you carry balance, that's a huge rate. Stores like Big Lots, Discount Tires, Guitar Center, and the Signet Jewelers cards. That's Kay, Zales and a few other brands," Rossman said.
The lowest retail credit card APRs are the Amazon Secured Card at 10%, the Military Star Card at 10.24%, the Sears Home Improvement Account at 14.40% and the Costco Anywhere Visa by Citi at 15.24%, according to Rossman. He added also those do not have credit ranges.
If it's 0% interest, promotional introductory rate, look for the term "deferred interest." Rossman said if you don't pay off the balance before the clock runs out, they can charge you back interest on all the interest that would have accumulated.
"Those 0% deferred interest promotions are especially tricky because when a bank offers that, usually they'll only charge you interest moving forward on whatever's left after the term. But a lot of these store cards will actually go back and charge retroactive interest," Rossman said.
What else does the card offer?
Some stores might only give out rewards for their store, while others — like Amazon — give you a percentage back on other things like gas. Also, consider how much you shop there.
"If you can pay in full and avoid interest, some retail cards can save you a lot of money, especially if you're loyal to the store," Rossman said.
I need time to pay something off
If it's time you need on a big purchase like an engagement ring or tires, explore buy now, pay later programs. Some of those include Affirm, AfterPay or Klarna.
Customers pick a payment plan with a fixed interest rate and depending on your credit, it could cost a lot less than store financing. The services tell you your payment, your interest rate and how much that means in dollars.
Stores from David Yurman to Walmart offer these plans.
"I mean, ideally, I would say save a pay in full, save your money to avoid any sort of interest. But these would definitely be more affordable ways to finance
something if you needed to," Rossman said.
Excess spending can lead to debt, and debt makes it even more expensive to borrow money.