The Finance Blogger

Retail credit cards can be a costly trap

retail-credit-cardsHow many times have you been standing at the cashier paying for your products that you’ve just purchased, when the cashier attempts to sell you a low interest or zero interest credit card from the retail store. Every year many people sign up for these retail credit cards because the interest-rate is zero for six months and they offer points or other benefits from the retail store.

These can be great deals if you’re charging your products to your own credit card and will not be paying the credit card balance off on the statement due date. Zero interest credit card which gives you six months free interest is actually a benefit if you’re the type of consumer who would normally pay interest on your own credit card.

The danger is that many retail store credit cards charge much higher interest rates than the typical Bank credit card. A Bank credit card will charge approximately 19% on any unpaid balance on your credit card. Retail stores who offer credit cards typically will charge between 25% to almost 30% on any unpaid balances. This is a much higher interest rate and much more expensive for anyone who carries a balance on their credit card.

High Interest Rate Retail credit cards

Regardless of whether you have 18% credit card or a 25% or 30% credit card consider consolidating your debt into a personal loan at much lower interest rates. If you have good credit ratings you should be able to find a personal loan somewhere in the range of 5% at the current time. Even if you have a bad credit rating a 10% interest-rate personal loan is still much better when you have a balance on your credit card at the 19% or 30% range.

This is the danger of those retail stores that offer retail credit cards to consumers as they are passing through the checkout line. Consider carefully also the impact on your credit rating as you sign up for more and more credit cards. The debt or potential debt that you may have from credit cards and your name will lower your credit rating and make it more difficult to obtain personal loans at a competitive interest rates.

For more posts about credit cards and interest rates, click here.

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