A lot more Americans say they’re likely to apply for a store credit card this holiday season than did in either of the previous two years, according to a new report from CompareCards by LendingTree.
That’s despite the fact that more than half (56%) of people who say they’ve had a store credit card say they’ve regretted getting one.
Key findings:
- Big jump in interest in store cards: 44% of Americans say they’re at least somewhat likely to apply for a store card during the holiday shopping season. That’s up from 32% in 2019 and 24% in 2018.
- Store card APRs fall: The average APR for a new store credit card is 24.24%, down from 25.41% in 2019, thanks largely to Federal Reserve interest rate cuts.
- More regrets: More than half (56%) of those who have had a store card regret opening one (and, in many cases, more than one). In 2019, just 46% of consumers regretted getting a store card.
- Nearly half have debt: 49% of those who have had a store-branded credit card currently have debt related to that card.
- Store card as primary card: Of those who currently have a store-branded card, 59% consider the store card to be their primary card.
- Gen X among most likely to apply: 78% of Gen X said they were likely to apply for a store card this year. Others: parents of kids under 18 (72%), those who were laid off/furloughed due to the pandemic (64%) and men (63%).
- Spend more, get better rewards: More retailers are trying to drive spending by creating tiered-rewards programs that let consumers earn rewards faster the more they spend.
Interest in store cards grows
- More than 4 in 10 Americans (44%) said they’re at least somewhat likely to apply for a store credit card this holiday season. That’s up 20 percentage points from just two years ago.
- Nearly two-thirds (63%) of consumers said that they’d felt pressured by a sales associate in the past to sign up for a new store card.
- Nearly half (49%) of those who said they felt pressured in the past did actually sign up for the card because of that pressure. That’s a success rate that most any salesperson would love.
Gen X among most likely to apply
Young consumers are highly likely to apply, as are those hardest hit financially by the pandemic are most likely to apply. Yet those with incomes of $100,000 or more are among the most likely of any group to say they’ll apply.
Rates dip but remain sky-high
While the average store credit card interest rates have changed, cards that had high APRs in 2019 tend to still have high rates today. Those with low rates last year tended to have low ones this year.
One major positive: For the first time in the three years we’ve done this study, no card featured an APR of 30% or higher.
Store card regrets continue to grow
With those sky-high rates, it’s easy to see why some people would end up regretting signing up for a store credit card. Those sign-up bonuses can be great but if you carry a balance on one of these cards, the interest you pay with those high APRs can easily exceed what you saved with that initial discount.
- Nearly half (49%) of those with a store card have debt associated with it.
- More than half (59%) of folks with a store card said that it was the credit card that they used the most.
The bottom line: Proceed with caution
Here are a few tips for getting the most out of a store credit card:
- Beware of deferred interest: While special financing deals really can save you big bucks, it’s crucial that you play by the rules because what you don’t know can cost you.
- Know APRs and fees before you apply: This is good advice with any credit card, but it’s particularly important with store cards because the interest rates are so high, and the pressure is often on to make a quick decision.
- Anticipate deadlines, exceptions, spending minimums: Virtually every card has quirks and nuances. The more you know about them before you apply, the better.
- Look for the other logo: Some store credit cards can only be used with one retailer or one group of retailers. Others can be used most anywhere. That’s an important distinction.
- Resist the pressure: If you’re offered a card and you aren’t sure what to do, say no and then read up on the card later. If the offer still sounds good to you, apply next time you shop there.
“Whether you’re online or in a brick-and-mortar store, take the time to understand more about the card before you apply,” said Matt Schulz, Chief Credit Analyst at LendingTree. “What seems like a great deal might be masking unnecessary fees or unusually high interest rates.”
