Is It Bad To Have Multiple Retail Credit Cards?
Posted by: Staff Writer | Jul 21,2007
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A retail credit card is a card issued by large retail businesses such as department stores, jewelry, furniture, appliance and other high-end stores.
Don't confuse it with a bank card, like Visa, Discover, American Express and Mastercard. Your retail card might have a bank symbol on it, but that's only because the card is supported by that bank's credit system.
The reason retail stores offer their own credit cards is so they can make more sales to their customers. They also make a profit off customers who do not pay their balances in full and incur interest charges.
It was more common thirty years ago for American consumers to carry more retail credit cards. Bank credit cards have become much more popular since then. However, large stores such as Target and Kmart both offer retail credit cards, a sign of modern retail strength.
Retail Card Interest RatesIs the interest rate better or worse with retail credit cards? It can be better. However typically it's much higher than bank credit cards, which currently average around 14 percent. Also retail credit cards can be astronomically high -- 25-30 percent annualized interest -- if you are late with one or two payments within a six-month period. This is probably the greatest danger of having multiple retail cards. If you fall behind on several accounts, it could seriously enlarge your debt.
However, if you pay on time and in full, the interest rate won't matter. Plus, a period of consistent on-time payments can help your credit rating.
The 10 Percent Off Retail Credit Card
Many stores will offer you an extra ten percent off the purchases you're making the day you open a retail credit account. Is that ten percent worth it?
It can be, if you pay off your bill in full. However, let's say you buy an espresso maker for $250 at a department store. By opening an account, you save 10% and only pay $225. However when your bill comes, you're not aware of the due date and even though you send in $100 you're hit with a $30 late fee. Then the next two months you also send in $100 and in the end, at 19.8 APR (which is average for a retail card), you paid $300 for a $250 espresso maker.
The Final Lowdown about Retail Credit Cards
Most of the time, you're better off with the interest rate and protection plans offered by bank credit cards. However, as long as you pay your bills on time (and preferably in full), it's not so bad to have multiple credit cards. You might even have access to loyal customer news about special sales.
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