It's not coincidence that most retail outlets promote store-branded credit cards. Why? It's profitable. Why? Because the consumer pays more -- way more -- for the privilege of using them when they carry a balance.
"Retailers dangle incentives like 15 percent off a purchase to encourage consumers to sign up for their credit cards," said Matt Schulz, senior industry analyst at CreditCards.com. "But this often ends up being a bad deal. The much higher interest rates far outweigh the one-time discount for anyone who carries a balance."
The average retail credit card annual percentage rate is 23.23 percent. That's more than 8 points above the average credit card interest rate and more than double what consumers with good credit can get, according to a CreditCards.com survey released Thursday.
Consider this example from CreditCards.com, making the minimum monthly payment for a $1,000 balance:
- Average retail card. It would take more than six years to pay off the balance, and you'll have paid an extra $840 in interest.
- Average non-store credit card. The balance would be paid off in less than five years, and interest payments would total $396.
- Average lower-rate card. Using a card with an APR of 10.37 percent, the balance would be paid off in just over four years, and the interest paid would be $232.
CreditCards.com reviewed the top 100 retailers by sales volume, as tracked by the National Retail Federation. Out of the 100 retailers, 36 have store cards. The highest interest rates: