Why retail credit cards could cost you big time

You may want to think twice before signing up for store credit cards.

Transcript

00:00The fourth quarter is when most of these store card signups take place. And there is a big buyer

00:05beware here, which is if you get offered one of these at the checkout, the pitch may sound

00:10compelling. They may say, hey, do you want to save 20% off today's purchase? It's not worth it if you

00:15carry a balance because these interest rates are sky high. Many store cards charge anywhere from 30

00:21to about 36%. All credit card rates are high, but these are especially high. So you just want to be

00:28really, really careful. The only two times it works really are both involve paying in full. One

00:34would be if you pay in full and you get a big discount off a big initial purchase. The signup

00:39bonus is often something like 20% off. So if you're buying a bunch of appliances or furniture and you

00:45can pay it off before interest hits, then it works. The other time is if you're loyal to the store and

00:51every time you use your Amazon card or your Target card or your Best Buy card, you're getting 5% back

00:57at their stores. And again, if you can pay it off in full before interest hits, well, then you're

01:02getting ahead relative to other payment methods. But other than that, you have to be aware of how

01:08high these interest rates are and be especially wary of deferred interest promos. A lot of store

01:13cards may say 0% interest for 12 months, but when they frame it as deferred interest, as many do,

01:20that means if you don't pay the full amount by the time the clock runs out, then they go back

01:24and they charge you retroactively for all of the interest that would have accumulated.

01:29That can really hurt.