Retail cards have perks — and costs

They often charge interest rates that are twice as high as those of regular credit cards

Retailers may be doling out in-store discounts, but when it comes to credit cards, they’re increasingly charging more.

Interest rates on store cards, which have been inching up for years, now average about 25 per cent, according to data from CreditCards.com, part of an online credit card marketplace. And, for the first time, at least one retail card commands a rate above 30 per cent.

A card offered a network by of BrandSource, locallyowned appliance, electronics and home goods stores, comes with an interest rate of 30.49 per cent. Three others — Big Lots, Piercing Pagoda and Zales — have rates of 29.99 per cent.

“The long and short of it is, if you carry a balance, retail cards just aren’t for you regardless of what discounts or rewards they may provide,” said Matt Schulz, an analyst for CreditCards.com. “Thirty-per cent interest rates are nothing to take lightly.”

Store cards have in recent years become a fixture of checkout counters, offering perks like 20 per cent off a first purchase, as well as in-store discounts, free shipping and cash back on future orders. Many also come with deferred interest plans that don’t charge customers as long as they pay off their balance in full within a given period. But after that, the cards often charge interest rates that are twice as high as those of regular credit cards, Schulz said. Some also retroactively collect interest on all past purchases, leaving consumer with much more debt.

Overall, the average interest rate for credit cards is 16.15 per cent, up from 15.18 per cent a year ago, according to CreditCards.com. Many cards increased their rates this year, Schulz said, following a series of modest rate hikes by the Federal Reserve. But despite higher rates, Americans are making more purchases on store credit cards. Retailers are actively courting shoppers, Schulz said, by offering better rewards and larger discounts on purchases.