Make a Repayment Plan for a Store Credit Card
Do you remember how we told you not to sign up for a store credit card at the checkout? According to figures released last week by CompareCards, many of you weren’t listening. Thirty-seven percent of Americans applied for a store credit card in the past holiday season, according to a poll conducted in late December.
Subscribing to a store map is ok if you are like the 54% of people who said they signed up to get a store discount. The problem starts to build up if you do this without an immediate payment plan for purchases with that card. The average annual percentage rate for retail cards is 25.4%, compared to an average of 15% for all credit cards at the end of 2019 . This means that the discount you’ve been so eager to get when shopping for holiday gifts may haunt you as interest right up until next Christmas and even beyond.
We understand that there is tremendous pressure during the holidays. Twenty-seven percent of respondents said they applied for a store card because they would otherwise have no money to pay for their holiday purchases. And 14% of respondents said that they were pressured by the cashier. In this situation, I feel sorry for both sides: the salesperson, who was probably pressured by his boss to sign up for a credit card, and the person who didn’t have the heart to turn down the offer.
If you are one of those who hit the store card this year, now is the time to make a plan for its payment. Just 28% of respondents said they planned to pay off their first store card purchase within a month, which means that the rest of you very hypothetical credit card holders are still paying what your nephews “should have had” on the Nintendo Switch and are now mostly ignored.
Why worry? As noted above, the interest rate on your new store credit card is likely higher than any other credit card. (Go check, we’ll wait.) This means that your amount owed on this card is growing faster than on your other cards. Basically, every day you spend with interest on your balance sheet is the day you lost money.
If you have a recurring source of income, set up recurring payments on this card to make sure you prioritize paying off the balance well before you start shopping for the 2020 holiday.
Have you got your store card for this holiday season? What prompted you to apply? Do you have a balance sheet repayment plan, if you have one?