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The hidden costs of store credit cards

December 07, 2010

By Barbara Marquand | Money Rates Columnist

Offers of discounts, zero percent financing on big purchases and the chance to win reward points toward merchandise may sound good, but think twice before you apply for a store credit card, especially if you're planning to carry a balance.

A new study by U.S. Rep. Anthony Weiner of New York reports that interest rates on store credit cards run as high as 28.99 percent, almost double the rate of an average credit card.

Weiner's study reviewed credit card offers at 35 major New York stores and found the average purchase rate was 23.83 percent, up from 21.71 percent in 2008 and more than nine percent higher than the average bank credit card rate of 14.78 percent.

Highest store credit card rates

According to the study, retail credit cards with the highest rates were:

• Radio Shack - 28.99 percent


• Best Buy - 27.99 percent


• Staples - 27.99 percent


• Home Depot - 25.99 percent


• Sears - 25.24 percent

Stores are pushing credit cards to help boost weak sales. Besides offering discounts for filling out credit card applications on the spot and rewards points toward merchandise for using your best rewards credit card 2012, retailers promote zero percent financing deals when you spend above a certain threshold. Best Buy, for instance offers zero percent financing for 18 months if you charge $429 and up. Radio Shack offers zero percent interest to January 2012 if you make a minimum purchase of $350.

But you must abide by the rules in the fine print of those offers, or you could owe a bundle in interest. Interest will be charged starting from the purchase date if you haven't paid the balance in full by the end of the promotional period. You also must make minimum payments each month and make them all on time to avoid losing the zero-percent deal.

Weiner has introduced legislation to increase point-of-purchase disclosure of interest rates, grace periods, and annual fees for store credit cards. The congressman is co-chair of the Middle Class Caucus and a member of the House Energy and Commerce Subcommittee on Commerce, Trade and Consumer Protection.

Follow these tips for store credit cards.

• Look for a low APR credit cards 2012 if you think you might carry a balance.

• Read the fine print of promotional low-rate offers on store credit cards. Make sure you can pay off the entire balance during the promotional period if you can't resist the card.

• Just say no if you already have enough credit. Getting too many top credit cards 2012 can lure you into overspending, make tracking purchases more complicated and bust your budget, especially during the busy holiday shopping season.

• Read the credit card terms and conditions before signing up to evaluate whether the card is actually a good deal.

• If you want to earn rewards, don't settle for a store credit card without exploring other options. Many bank credit cards offer rewards, so shop around to find the best deal.

Signing up for any type of financing on the spot without knowing the terms and conditions is a bad idea. Understand the details and evaluate whether the credit card fits in with your financial goals before you apply.

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