We’ve all been at the register of our favorite retailer when they ask if we’d like to save a little extra on our purchase. All we have to do is apply for a new, store-branded credit card.
It sounds harmless enough. After all, applying could save you a pretty penny on your purchase, you’ll have access to special sales and coupons, and well, you obviously shop there anyway. So why not?
Well, if you’re part of the nearly half of Americans with buyer’s remorse, you’ve made this mistake in the past… and you now wish you’d never gotten a store credit card.
Here’s a look at what a recent survey found, along with why store credit cards are causing so many customers regret.
Wishing They’d Never Applied
According to a recent survey by LendingTree, three-quarters of Americans have had a store branded credit card at some point in their adult lives. Broken down further, a whopping 88% of households with an income greater than $100,000 reported having had store credit cards. This is compared to only 73% of households with incomes between $25,000-$50,000, and only 53% of households making less than $25,000 a year.
These cards are enticing for a number of reasons. Many of them offer special savings on the day of application, along with future coupons and discounts. Some stores will offer “no interest financing” if paid in full by a certain period of time, making a big purchase feel like less of a pinch.
But after the sweet taste of a big discount on day one wears off, the majority of store cardholders are left with regret.
A surprising 58% of adults in $100k+ households say that they regretted getting a store credit card. This isn’t too far off from those in the $25,000-$50,000 households, of which 44% wish they hadn’t applied, or the regrets from 43% of the $25,000-and-under households. Overall, around half of all Americans – regardless of household income – regret ever applying for a store branded credit card.
Why The Hard Feelings
It’s no wonder that so many cardholders regret getting at least one store-branded credit card in the past. With few exceptions, they’re simply not very good products.
First and foremost, they have the worst interest rates of any credit card category, easily dwarfing the interest charged by travel cards, cash back cards, and even student credit cards. Store credit cards are notorious for APRs well into the high 20s and even 30s, making them an incredibly dangerous card to carry if you ever plan to hold a balance from one month to the next.
Many store credit card customers could also be harboring hard feelings for cards that offered (what appeared to be) zero interest. A no-interest financing offer is common among store branded credit cards, offering customers the ability to spread out the repayment of large purchases – such as a new A/C unit when theirs unexpectedly goes kaput – without incurring interest.
Except that these offers aren’t actually interest-free; they’re interest deferred.
Store credit cards offering 0% financing have one very important caveat in the fine print: if paid off in a certain amount of time. The account will still keep track of what your interest charges would have been. Fail to clear out the entire balance before the promotional period expires, and you’ll be on the hook for all of that deferred interest.
I can understand the anger surrounding “no interest offers” all too well. Many years ago, I miscalculated the final month of my A/C unit’s card payoff by $17. On my next statement, which I expected to be $0, I was shocked to see the addition of $877 in deferred interest charges. Even though it was obviously a mistake on my part, the issuer would not budge… and I was on the hook for the almost-$900 in “no interest.”
One more reason to be irked by store credit cards is the fact that they are limiting. Sure, you can get the occasional discount or special shopping access, but unless it’s a store you’re visiting weekly, is it worthwhile? With today’s cash back credit cards offering incredible rewards and valuable points redemptions, you might be better off using an everyday card instead.
Should You Get a Store Credit Card?
The decision to apply for a store card depends on your shopping habits as much as the specific card offer.
How often do you shop at that store, and will opening an account give you access to regular discount offers or lucrative rewards? If you’re applying just to enjoy a one-off discount, you’re better off scouring the web for an online coupon.
If you are at risk for carrying a balance from one month to the next, or need to make a large purchase, look into a true 0% interest offer from an everyday credit card. Store cards not only charge astronomical interest rates, but any 0% offers given will likely be “deferred” instead. Don’t risk it.
However, if the store credit card in question is particularly beneficial – such as offering a sign-up bonus or exceptional rewards – then it could be worth the application. Just be sure to cut the card in half when you’re done using it for its intended purpose, and never allow yourself to pay a 35% interest rate on purchases.
