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Tempted by the discount? Retail credit cards can be costly

 
Published Aug. 31, 2014

The next time you're tempted to sign up for a retailer's credit card to get a discount on your purchase, think again if you don't pay off your credit cards every month.

That's because retail credit cards charge much higher interest than most other credit cards, according to a report from CreditCards.com.

"If a consumer has a $1,000 balance on the average retail credit card and makes only the minimum payments, it would take the cardholder 73 months to pay off the balance and he/she would incur $840 in interest fees," the website said. "That's 17 months longer and $444 more expensive than a $1,000 balance at the national average annual percentage rate of 15.03 percent for all credit cards."

The highest APRs are charged by Irving, Texas-based Zales at 28.99 percent, Office Depot at 27.99 percent and Staples, also at 27.99 percent, the study said.

"Retailers dangle incentives like 15 percent off a purchase to encourage consumers to sign up for their credit cards," said Matt Schulz, an analyst at CreditCards.com. "But this often ends up being a bad deal. The much higher interest rates far outweigh the one-time discount for anyone who carries a balance."

On the other hand, cardholders who pay their balances in full each month can find value in retail rewards programs, CreditCards.com said.