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Why store credit cards may not be the best idea for holiday shopping

Posted at 4:01 PM, Dec 14, 2020

CLEVELAND — Who’s been at a store buying holiday gifts and then the cashier asks, “do you want to sign up for our credit card today?” They might offer a discount or something else, but should you sign on the dotted line?

“They make it easy. They really make it easy,” Leanne Smith said.

Smith is from Solon and knows how stores can tempt you with their credit cards, but she’s sticking to her Target Red Card for now.

“I don’t think it’s a responsible thing for me to have one at every store,” she said.

Tedd Rossman from said that if you ever plan on carrying a balance, store cards aren’t going to be the best option for you.

“While sometimes these store cards can work for you, most of the time, they’re not the most consumer-friendly option,” Rossman said.

That’s because Rossman says the average store credit card has an interest rate of 25%, some as high as 29.99% such as Discount Tire, Big Lots and jewelry store cards like Kay Jewelers.

“These cards are not as selective about credit quality, which is why the retailers and their bank partners say they have to charge such high-interest rates,” Rossman said. recently rated various popular store cards based on various things like interest rates.

Here are those results:

  • Target - 24.4%
  • Old navy - almost 26% (25.99%)
  • Walmart - roughly 18-27% (17.99%-26.99%) interest

Nathan Grant from said you shouldn’t just sign-up at the checkout on a whim even if there’s a discount offered or cashback incentives.

“The percentage of interest you’re paying might end up calculating to be more than what you got from spending on the cards,” Grant said.

According to Grant, some of the better retailer cards are:

Amazon prime cards with lower interest rates—5% back on Amazon purchases and gift cards when you sign up. Target—higher interest rate, but 5% back. And the only one rated excellent is Costco’s card, which has a 15% rate and various cash back options and good rewards on gas purchases.

But keep this in mind: In a survey of nearly 3,000 shoppers nationwide, more than 40% said they regretted signing up for a retail credit card. Plus, one out of five in the survey said they carried a balance from the last holiday season, and more than 50% said they’ve paid interest on a retail store card.

“That’s kind of like a wake-up call even to myself to be like I got to make sure that I’m always smartly shopping if I’m using credit cards,” Grant said.

For Smith, she said she’s only carried a balance a couple of times in the past 20 years because she knows “if you can’t pay it, you really shouldn’t buy it just because you have a credit card.”

Retail credit cards can give you benefits especially if you’re loyal to the business. It could help you build credit, but you’ll want to pay off your balances every month and spend responsibly.

And another thing to watch out for is deferred interest. Even if you owe just one dollar by the time the term ends, you could end up paying interest on the entire amount you initially financed.

This story originally reported by Jonathan Walsh on