4 Ways to Avoid the Traps Set by Store Credit Cards
By: Brian O'Connell

NEW YORK (sbup) — Using a store credit card these days?

Hey, lots of people do, especially with the holiday shopping season just around the bend. Retail cards accounted for $270 billion in consumer spending last year, according to the Federal Reserve.

But note that the cost of using a retail outlet credit card has gone up, as the interest rates attached to such cards are climbing. According to CreditCards.com, the annual percentage rate on store cards has risen by 2%, to a whopping 23.23% this year.

Compare that to the average APR of a traditional credit card, such as Visa or MasterCard, which is about 15%.

If you accumulate $1,000 in spending on a store credit card and make the minimum payments each month, it will take you an average 73 months to pay off the balance. Oh, and those fees? Consumers would rack up $840 in interest fees over the same period – perilously close to the amount borrowed in the first place.

CreditCards.com notes that hiking rates isn’t the only trick. Rewards programs and one-off shopping discounts (in which you get a price break if you buy a specific item on a specific day) are also designed to separate you from your cash, even though you may think you’re getting a bargain.

Here are some things you can do to fight back:

Use a major credit card. In the vast majority of cases, traditional credit cards offer better deals. Stow the store card and use a major credit card and you'll save on fees and discount/rewards programs.

Use a debit card. Better yet, pay as you go and use a bank debit card to avoid any interest fees in the first place. Just make sure you have enough cash in your bank account before you spend. That way you don’t incur overdraft fees.

Pay promptly. As long as you pay your store credit card bill each month, in full, accumulated interest won’t affect you.

Ask for a better deal. Some retailers are flexible about interest rates, but you have to do a little digging first. Nordstrom, for example, offers a 10.9% store card, but you need good credit. Ask around and see how low your retailer will go on APR.

The real deal on store credit cards is to pay attention, read the fine print, shop wisely, and don’t be late in making payments. Stick to that script and retailers won’t be taking a bigger chunk out of your bank account than they need to.

—For more ways to save, spend, invest and borrow, visit MainStreet.com.

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