If a cashier offers you 15% off at Target, Kohl’s, or Best Buy this month in exchange for opening a store credit card, that discount is real for one day. Carry the balance five months and it’s gone. Carry it a year and you owe the store more than you saved.
The register is trained to sell you a card in about ninety seconds. The pitch is always the same: “Would you like to save 15% today?” The pitch never mentions the APR because the APR is what pays for the discount.
Bankrate’s most recent retail card survey put the average store card at 30.14%. Store-only cards, the ones that only work at that one retailer, run 31.64%. Thirteen cards charge the maximum 35.99%. That list includes Michaels, Burlington, Petco Pay, Saks, and Victoria’s Secret. Saks jumped from 29.24% to 35.99% in one year.
The average general-purpose card is nine points lower. The Federal Reserve’s G.19 report from July 8 puts the rate on all card accounts at 20.94%. Store cards charge nearly a third more for the same thing your Chase or Capital One card already does.
Here’s the catch. The retailer isn’t giving you 15% off out of kindness. They’re giving it to you because their contract with the card issuer pays them for every new account opened. The discount is a marketing budget. You are paying it back with interest, at a rate the register never quotes.
$500 back-to-school purchase, carried twelve months at 30.14% APR: about $151 in interest. The 15% discount was $75.
Do the math on your own trip. If you can wipe the balance on your first statement due date, the discount is free money. If you’ll carry any of it for even three months, you’re better off paying full price and putting it on a general card.
Here’s the move. Take the deal only if you already have the cash for the purchase and you’ll pay the statement in full. If you can’t do that, say no thanks and walk out. If you already carry a balance on a store card, transfer it this week to any general-purpose card with a lower rate. Nine points of APR on a $1,000 balance is about $92 a year. Real money.
If you already opened one at the register last back-to-school and forgot about it, pull it up in your bank app tonight. Check the APR and the balance. If the APR starts with a three and the balance is still there, you’re the customer that promotional discount was designed for. Fix it.
You don’t need to close the card once you pay it off. Old accounts help your credit history. Just stop using it. The card is not your friend. Neither is the coupon.
How Candid Yak makes money. Some of the products we write about pay us if you apply or sign up through our links. That never changes our verdict, our rankings, or the numbers in this article. We call a bad deal a bad deal whether it pays us or not. Some brands shown in our comparison tools are placeholder examples while we finalize partner agreements, and we label them as such.