Why You Should Think Twice About Getting That Retailer Credit Card on Black Friday

While holiday shopping, you may feel the urge to sign up for a store credit card as you listen to the cashier talk about how much you could save with one.

But it pays to think through the details, experts say, even if you sense the people in line behind you growing restless. The deal may not be as sweet as it first seems.

“There might be some discount or promotion that you would qualify for,” said Chuck Bell, director of the advocacy program at Consumer Reports. “But because the interest rates and late fees are so high for these cards, it doesn’t take very much to wipe out any savings that you would gain if you happen to miss a payment.”

People have been getting fewer store credit cards, according to research from Equifax, a credit reporting agency. The number of these so-called private-label cards opened in the first half of 2024 fell more than 18% compared to the same time last year, Equifax said.

But retailers still count on them for revenue. And the holidays are prime time for retail credit card promotions, Bell said, because stores anticipate more foot traffic. Here are a few things to keep in mind when sales associates start telling you about their store cards.

They may have higher interest rates and late fees than other credit cards.

The cost of missing a payment or accruing a balance may be greater on store cards, Bell said.

The average interest rate on retail credit cards is 30.45%, according to an analysis from Bankrate. It’s about 24.62% in the broader credit card market, according to an Investopedia analysis.

Late fees, meanwhile, can be as much as $41 on Macy’s, Burlington and Petco cards, according to terms and conditions published on their websites. The average late fee on all credit cards, however, is $32, according to the U.S. Consumer Financial Protection Bureau.

A counterpoint: Retailers’ cards are traditionally easier to qualify for than other cards, Bell said, so they may rely more on interest and late fees to guard against losses.

The cards may have unexpected conditions.

Bell urged people to check whether the retailer’s card can only be used at its stores, or whether it’s accepted by most merchants. It can be easy to forget about cards that you only use occasionally and miss payments on them, he said.

He also cautioned consumers to look out for cards with deferred interest policies. These cards may have no interest for six months or a year. But if you miss a payment or don’t pay off the full balance in that time, he said, interest may be retroactively applied to that introductory period.

You may have other options.

If your budget is tight, consider using traditional credit cards with more “reasonable” interest rates, Bell said. Credit unions may be a good place to get a new card because they use interest payments to keep costs down for other cardholders, he said.

Many merchants have buy now, pay later (BNPL) options available at checkout. These allow people to take home items, while continuing to pay for them in biweekly or monthly installments. BNPL providers such as Klarna, Affirm and Afterpay may offer other interest-free products directly to consumers. (The holiday season is also seen as vital to BNPL firms.)

These fintech companies may provide “a pretty good deal,” when it comes to interest, Bell said, adding that they may still charge late fees.