PITTSBURGH (TNS) — Is that discount at the register really worth it? Be aware: signing up for retail store credit cards might cost more than you realize.

Consumers now pay an average of 30.45% to carry a balance on store credit cards, according to an early September Bankrate survey of 108 store cards from leading retailers.

A 30% interest rate used to be the unofficial ceiling for the highest store cards. But not anymore.

Of the 108 cards Bankrate surveyed, 66 charged more than 30% interest.

You’ll pay 34.99% to carry cards from Macy’s, Nordstrom, JCPenney and TJ Maxx. The highest annual percentage rate was 35.99% — charged by companies such as Petco, Burlington, Big Lots and Michaels.

“These are rates that we used to think of for people with really, really low credit scores,” said Ted Rossman, Bankrate’s senior credit card industry analyst.

“Store cards charge everybody the same rate — take it or leave it. It’s 34% or 35% for everybody,” he said.

The season for big spending is around the corner, and major retailers — from home improvement warehouses to department stores — will likely be ramping up promotions, including for new credit cards.

But don’t fall into a trap and apply for one of these cards impulsively at the checkout counter, Rossman said.

“It’s fine to say ‘no’ or ‘not right now’ or ‘I’m going to think about it’,” Rossman said. “The retailer might dangle 10% off today’s purchase if you sign up, but it’s not worth it if you’re going to pay a 30% interest rate for years to come.

“Be absolutely sure that you can pay in full before interest hits,” he said.

Saddling consumers with debtCredit cards that can only be used at particular stores or store chains are charging well above the 20.78% national average that traditional credit cards charge.

At a time when inflation is already cutting into wallets, consumers carrying a balance on store cards could end up in a debt hole that’s hard to dig out of.

“A 30% interest rate on store cards is exceptionally high, but unfortunately it’s quite common and these sky-high rates saddle people with debt for years,” said Lynnette Khalfani-Cox, author of “Bounce Back: The Ultimate Guide to Financial Resilience.”

“To put it in perspective, if you charge $1,000 on a store card with that rate and only make the minimum payment of $25 a month, it will take about 6 years and 5 months to pay off the $1,000 purchase,” she said.

Over that time, you’d pay a total of $2,895, or nearly triple the original purchase price, Khalfani-Cox said.

Retailers charge higher rates than traditional credit card issuers for a couple of reasons.

First, store cards often are easier to qualify for than traditional credit cards, which means the company often takes on more risk with applicants who have lower credit scores.

Second, it’s an additional revenue stream for retailers beyond just product sales.

“Store cards are easier to get because these retailers and their credit partners are not as selective about credit quality,” Rossman said.

Some retail industry analysts estimate Macy’s has collected nearly half its total profits from its credit cards in recent years, according to PaymentsJournal, a trade publication for banking industry professionals.

‘These cards are big money makers’The lowest retail credit card rate Bankrate found was 10% on the Amazon Secured Card. The Military Star card charges only 15.49%, but it can only be used at military facilities.

Bankrate found 13 retail credit cards that charge 34.99% to all cardholders who carry balances.

According to Federal Reserve data, credit card balances for U.S. consumers increased to $1.14 trillion in the second quarter of 2024. The average credit card balance per consumer, according to TransUnion, increased to $6,329 in the second quarter of 2024.

The Federal Reserve recently offered some relief for borrowers by lowering its key interest rate by half a point. But that will hardly make a difference for someone paying more than 30% interest.

“I wouldn’t hold my breath for financial relief there,” Khalfani-Cox said.

“These cards typically maintain higher rates regardless of Fed actions, as they operate in a somewhat separate market from traditional cards,” she said.

Meanwhile, the federal Consumer Financial Protection Bureau has been putting more pressure on the credit card industry to reduce the fees they charge consumers.

The average credit card late fee is $32, but the CFPB has proposed capping it at $8. A federal judge struck down the CFPB’s ruling in May. But the decision is still winding its way through the courts, and many still expect it to take effect.

Retailers offering store cards rely more heavily on late fee revenue, and have been preparing for the late fee reduction by doing other things like raising interest rates and instituting fees for paper statements in some cases,” Rossman said.

“These cards are big money makers,” he said.

‘An uphill battle’When the store credit card offers roll out, credit experts say to beware of two words that could wreck your wallet — deferred interest.

It sounds harmless. It may even come wrapped in a 0% interest introductory rate. But the devil is in the details. Deferred interest means if you don’t pay off the entire balance within the promotional period, you’ll be hit with retroactive interest for the full amount, dating back to day one.

“In an extreme example, you could have bought $5,000 worth of appliances on a store card and even if you have just $1 left on the balance at the end of the promo time, they’ll assess your average daily balance times your daily interest rate all the way back to the start of the promo,” Rossman said.

“It’s a double whammy,” he said. “It’s a high interest rate that really compounds.”

There are some narrow circumstances where retail cards could work for you, Rossman said.

“Some stores such as Amazon, Best Buy and Target offer 5% cash back every time you use their card to buy something from them,” Rossman said.

“That’s probably better than you would get with any other card,” he said. “For a loyal shopper who pays in full and avoids interest, that’s a compelling proposition.”

The best way to use any credit card is to pay it off in full every month. That’s especially true for store cards charging more than 30%.

“People should use them with extreme caution, or avoid using them altogether unless they’re certain they can pay off the balance in full each month,” Khalfani-Cox said.

“The interest rate on store cards is so high that carrying a balance is like trying to run up a down escalator. You’re fighting an uphill battle from the start.”