Be aware of problems with retail credit cards as you shop this holiday season

As you’re doing your holiday shopping, it may be tempting to sign up for a retail credit card to take $25 or $50 off a big purchase.

Don’t do it.

These cards typically come with higher-than-average interest rates and limitations on rewards earning and redemption. 

A survey by FinanceBuzz, a financial information website, of 1,000 cardholders to figure out if retail cards are worth the hype found the following: 

• One five cardholders said they’re more likely to carry a balance on retail cards vs. other credit cards.
• 64 percent thought the rewards and discounts offered by retailers were worth opening such a limited line of credit.
• On average, consumers say they’d have to be offered $115 in savings in order to sign up.

Before you decide to finance a holiday purchase with a retail credit card, it’s important to ask yourself three key questions, said Chris Lewis, head of research at FinanceBuzz:

1. How much interest am I paying?
2. What’s the benefit of paying with this card?
3. When am I really going to pay this off?

“If you don’t have good answers to all three of those questions, you may want to think twice about the purchase, or consider alternative financing options,” Lewis said. “Just because you have a retail credit card doesn’t mean you should always rely on that card, and it definitely doesn’t mean you should spend more than you can afford to pay back.”

Also, make sure to set yourself up with a holiday budget so that you won’t have stress after the holidays about spending too much money.

Comments

[Carol Cassara]

I haven't had one in many years. I just have the bank cards now.