Newspaper article Pittsburgh Post-Gazette (Pittsburgh, PA)

Store Cards Can Carry Higher Interest Rates

Newspaper article Pittsburgh Post-Gazette (Pittsburgh, PA)

Store Cards Can Carry Higher Interest Rates

Article excerpt

With credit card interest rates averaging just over 15 percent, it's not hard to understand why it's a bad idea to carry a big revolving balance.

Running up bills that can't be paid off each month is an especially bad move when it comes to store cards, which tend to charge much higher rates than general-purpose credit cards.

Interest rates on cards issued by America's largest retailers are averaging 23.23 percent, according to a new survey by the credit card comparison site CreditCards.com, based in Austin, Texas. That's 8 percentage points higher than the national average of 15.03 percent for all types of credit cards.

The survey included the 36 largest retailers in the U.S. that offer credit cards. Among the stores with the highest rates were Office Depot and Staples at 27.99 percent, and Zales, where rates ranged from 17 percent up to 28.99 percent.

A number of other stores were charging 26.99 percent, such as Dick's Sporting Goods, JCPenney, TJ Maxx and Toys R Us.

Among the store-issued cards offering the lowest rates were Costco at 15.24 percent, Nordstrom, which ranged from 10.9 percent to 22.9 percent, and OfficeMax at 9.99 percent to 23.99 percent.

When a retailer has a range of rates, the offer is based on the applicant's creditworthiness. Customers with the best credit scores - generally a FICO score of 750 and above - will qualify for the lowest rates, said Matt Schulz, senior industry analyst for Creditcards.com.

The chief reason that store cards tend to charge higher rates than general-purpose cards involves risk, he said.

"These are so-called instant approval cards where you know within a couple of minutes whether you [qualify]," Mr. Schulz said. "Those types of cards tend to be viewed as a little more risky. In order to hedge against the risk, they charge a higher interest rate."

In a bid to attract cardholders, more retailers have begun offering co-branded cards aligned with the big credit card networks, the survey found. For example, OfficeMax has a Visa signature card good anywhere Visa is accepted.

Those types of cards generally charge slightly lower interest rates than regular private-label store cards, Mr. …

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