Store credit cards aren’t deal you think they are

Walk into any store during the holidays and the odds are good that you’ll be pitched with a credit card offer.

Need an extra 15 percent or 20 percent off on the spot? Open a credit card.

But not so fast. A simple move to save money right now could cost you a lot of money in the long run if you don’t watch out for the hidden costs of those popular credit cards offered at stores at the mall.

During peak shopping seasons, such as Christmas or backto-school, consumers are more likely to open a retail-label credit card, said Michael Moeser, director of payments practices for Javelin Strategy and Research.

Two key features of store credit cards resonate with shoppers: Consumers can get an extra credit line to spend more money on gifts. And there’s that added savings on top of already discounted prices.

So what could rip into your wallet here?

This is not a cheap way to borrow: Don’t dwell on the 15 percent or 20 percent discount you’d get at the store if you open up the card.

Instead, look at the interest rate you’re going to face on a store brand credit card if you don’t pay off all those gifts when the bill comes.

The average APR on a store credit card is 28.26 percent — compared with 26.72 percent a year ago, according to a survey by WalletHub. Rates are typically variable and will go up when the prime rate increases. The prime rate will go up again each time the Federal Reserve raises rates.

More rate increases are expected in 2018. In contrast, the average rate on credit cards issued by banks or credit unions is about 16.5 percent, according to CreditCards.com. Some consumers who shop around and have good credit can find credit cards with rates around 10 percent or lower.

“It just doesn’t make sense to pay 25 percent on a card to save 15 percent on a purchase,” said Matt Schulz, senior industry analyst for CreditCards.com.

A store-branded credit card is a really bad choice, he said, for anyone who can’t pay off the bill in full each month.

Late fees can make a discount meaningless: Say you save 15 percent on a $200 purchase, or $30. If you’re going to have trouble making payments on time, you could face a late payment penalty of $27 or more.

Terms for some store credit cards indicate that the late payment fee can be up to $38, especially if you make repeated late payments.

Read the fine print. And pay attention to when the bills come due. It’s way too easy to lose track of a bill — especially if you use a credit card only for a specific store every once in a while.

Spending more money does not mean you’re saving money: One goal retailers have when they issue you a store-branded credit card is that they’re trying to turn you into a more loyal customer. They track your spending — and bombard you with sales and deals via e-mail or regular mail throughout the year.

“They can e-mail offers to you, which means you may end up spending more money because you purchase items on sale,” said Bill Hardekopf, CEO of LowCards.com.