Store credit card applications skyrocket around Black Friday --  but the discounts they offer come with a catch

Shopping teenagers retailThomas Lohnes/Getty Images for RESERVEDThe price you pay could be way higher than it seems.
  • Many retailers lure customers with store credit cards during the holidays, which offer discounts in exchange for loyalty.
  • But interest rates on retail credit cards have risen to almost 25%, or more than 10% higher than general-use credit cards.
  • If you carry a balance, it’s not a good financial move to sign up for one.

For a frequent shopper, nothing is better than a good discount.

Thankfully, shoppers no longer have to wait around for bargain holidays like Black Friday or Cyber Monday to get their fix.

Stores like Macy’s and Nordstrom have begun offering deals year-round to combat the retail apocalypse. One way they’re luring customers is through store credit cards and accompanying loyalty programs. In the US, consumers hold an average of 1.51 retail cards, according to Experian’s annual State of Credit analysis.

The most popular time for sign-ups is during the holidays. In fact, discount retailers, online stores, and jewellery stores nearly double their sign-ups in the month of December.

But while the initial offer can seem enticing — nearly two-thirds of the store cards recently surveyed by offered same-day, percentage-off discounts at sign-up — it’s not always a good financial move.

Interest rates on the average retail card have risen for the third straight year to 24.99% compared to the average general-use credit card APR of 16.15%, according to

“When you sign up for a store credit card, you’re also signing up for frequent nudges to buy, buy, buy, which means you’re often spending more than you would normally,” financial planner Sophia Bera, wrote in an article for Business Insider.

That means your loyalty can come at a steep cost if you don’t pay off your balance in full. The average retail cardholder has an outstanding balance of $US1,081, according to Experian.

“The reason the interest rates are higher [than general-use credit cards] is that retailers are much more liberal in issuing a credit card to customers than the banks might be,” said Craig Shearman, vice president at the National Retail Federation. “These cards are very often offered to young people who are just starting to build a credit history or they can be offered to someone who maybe has a weaker credit history who wants to get a card.”

The retailers with the highest interest rates on their credit cards are Big Lots, Zales, Brandsource, and Piercing Pagoda, which all offer APRs near 30%, the maximum allowed, according to the survey.

A high interest rate coupled with a habit of not paying your bill could could be damaging.

“If you tend to carry a balance on your credit card, an interest rate this high will come back to bite you,” Bera wrote.

Some retailers offer special financing or deferred-interest deals, but those can also be dangerous for shoppers prone to racking up debt. For example, 26 of the cards surveyed by allow customers to avoid interest entirely if a purchase is paid in full by a specific date. If the balance isn’t paid off in the time frame, however, the cardholder will be responsible for paying back interest dating back to the original purchase date.

Ultimately, Bera suggests not limiting yourself to one retailer — unless you’re particularly loyal to that store and disciplined about paying your bill — because many traditional credit cards offer cash back and points that you can spend at several different retailers and on travel.

To see how the most popular retail credit cards stack up, check out this data from

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