Buzz
Do you recall when we advised against signing up for a store credit card at checkout? It turns out that many of you didn't heed that advice, according to data from CompareCards released last week. A survey conducted in late December revealed that 37% of Americans applied for a store credit card during the past holiday season.
Signing up for a store card can be acceptable if you're among the 54% of people who applied to take advantage of a store discount. The issue arises, however, if you sign up without a solid plan to pay off your purchases right away. As of the end of 2019, the average retail card APR was 25.4%, far higher than the 15% average for all credit cards. That means the discount you were excited to receive while shopping for holiday gifts could end up as interest payments all the way until next Christmas—and possibly beyond.
We understand, there's a lot of pressure during the holidays. According to a survey, 27% of respondents said they applied for a store card because they didn't have enough money for their holiday shopping. Another 14% admitted they were pressured by the cashier to apply. It’s unfortunate for both the salesperson, likely pushed by their boss to secure credit card signups, and for the customer who felt too guilty to decline the offer.
If you were one of those who felt pressured into signing up for a store card this year, now’s the moment to create a strategy to pay it off. Only 28% of people said they intended to pay off their first store card purchase within a month, which means the rest of you hypothetical credit card holders are likely still paying off that Nintendo Switch your nephews 'had to have' and now barely use.
Why stress over it? As mentioned earlier, the interest rate on your new store credit card is likely much higher than on your other cards. (Go ahead and check, we’ll wait.) This means the amount due on that card grows faster than on your other credit cards. Essentially, every day your balance accrues interest is another day you’re losing money.
If you have a steady source of income, set up automatic payments for that card to ensure you prioritize paying down the balance before you begin shopping for the holidays in 2020.
Did you sign up for a store card during the holiday season? What influenced your decision to apply? Do you have a plan to pay off your balance if you have one?
