Store credit cards can be tempting, especially from
a retailer you frequent
. But whatever perk or benefit they offer may be far outweighed by
Rep. Anthony Weiner (D-N.Y.) recently released a study of 35
major retailers' store cards. On average, they charge 24% in
interest. Compare that to the national average of 15% for regular
Topping the list is
) , with a rate of 29%. It's followed by
) at 28% and
) at 26%. The companies often entice customers with special teaser
deals, such as no interest for 12 months if you spend more than
$350 (Radio Shack), or no interest for six months with purchases
over $299 (Best Buy and Home Depot).
The cards are fine if you always pay off your balance on time.
who let charges pile up
while they're paying interest rates between 20% and 30% are getting
ripped off. (An exception: While 34 of the 35 retailers charged 19%
longtime Fool favorite
) charged just 15%, after no interest for six months.)
One reason for the generally steep rates may be that the banks
that manage stores' card portfolios have to get paid. Couple that
with rising delinquency rates in recent years, and you get a recipe
for sky-high interest.
Good for investors
The cloud of steep interest rates has a silver lining, though -- if
only for investors. Extracting gobs of money from borrowers can pad
a company's bottom line. At Best Buy, promotional financing offers
to store card holders accounted for 17% of revenue during its 2010
fiscal year. Home Depot reported that about 25% of revenue came
from its private-label credit card in fiscal 2009. And at
) , credit cards generate around 4% of revenue.
The gravy train might not last, though. Congress is obviously
aware of the problem, and the new Bureau of Consumer Financial
Protection headed by Elizabeth Warren may well address it. But for
now, consumers beware, and
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