Wednesday, November 18, 2015

Retail Credit Cards Are Robbing You recently released their annual survey of credit cards rates for retail branded cards. Retail branded cards are those issued by stores, such as The Gap, Apple, Macy's, or Staples. The results are not good news for consumers.

The average interest rate on retail credit cards in 2015 is 23.43%. Zales Jewelers has the highest rate at 28.99% and Staples comes in second at 27.99%. For comparison, the nation average for "regular" credit cards is 15%. How much will this save you? On a $1,000 balance, if you pay the minimum amount on a card with a 23.43% interest rate, it will take you 6 years to pay off the balance and you'll pay $838 in interest. Think about that. You got $1,000 of merchandise for $1,838. You almost doubled your cost. I hate to be the one to tell you this but.. Shopping? You're doing it wrong.

If you instead used a normal card with a 15% interest rate to make that $1,000 purchase and paid the minimum amount, you'd have it paid off in just four and a half years and would only pay $370 in interest. That still sucks. You've still paid 37% more than you should have, but at least you saved over $450 with the lower interest rate card.

Many times, stores will offer benefits for using their retail credit card, either discounts, cash back, special sales, etc. If you pay of your balance in full each month, these can be worthwhile. However, if you carry a balance, odds are you will be losing money in the long run.

Carrying a credit card balance on any type of card is one of the worst things you can do financially. But if you have to carry a balance, at the very least, get a card with a low interest rate and don't fall for the gimmicks stores use to try to get you to use their card. No matter what incentives they offer you, if you carry a balance on their card, you will end up losing money. Guaranteed.


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