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SALT LAKE CITY — Let's face it: Maybe the only thing that tops holiday shopping is getting a great deal when holiday shopping.
Half-price can seem like a bargain, but by opening a store credit card you could save an additional 15 to 30 percent off your purchase.
The KSL Investigators hit malls and stores across Salt Lake County to collect and review store credit card applications to see if the offers are worth it.
Many stores tried to sign us up on the spot. One told me I would need to answer just three easy questions to qualify, several retailers offered discounts if I got approved, and one store said I could save 30 percent off my entire purchase that day.
Not every store offers immediate discounts, though. Some will send credit customers discount coupons based on how much they charge to their card.
Stores bank on making up those discounts by charging customers annual percentage rates that are climbing near 30 percent.
Interest rates near 30 percent
"Any time you have interest rates climbing near 30 percent, that's a real eye-opener," said Matt Schulz, senior analyst for CreditCards.com.
Schultz's company recently surveyed 100 retailers and found, on average, the annual interest rate has crept up. In 2010, it was around 21 percent; today it's nearly 24 percent.
But that's the average. KSL-TV found Shopko's card has a rate of 25.99 percent.
"That's ridiculous," Archibald said.
Big Lots discount chain's rate is even higher at 29.99 percent.
According to CreditCards.com, Zales Jewelers is almost as high, at 29.24 percent; and Staples, an office supply store, offers a credit card with a rate of 28.24 percent.
Schulz said store card rates are about 10 percent more than a traditional credit card, like a Visa.
Discount disappointment
Climbing interest rates are why shoppers can suffer discount disappointment if they open a credit card to qualify for a special offer. Sure, the upfront savings may seem enticing, but consider this scenario:
If you purchased a $1,000 television using a store credit card, with a rate of about 26 percent it would take 38 months to pay it off making minimum monthly payments. The $100 credit card sign-up bonus you received when you opened your account would be wiped out by the $429 in interest you'd pay.
Financial experts weigh in
Shane Stewart, a certified financial planner for Deseret Mutual, says shoppers should not bend to sign-up bonuses offered at the checkout counter.
"The standard answer should be no," Stewart said. "Say, 'Give me the information and I'll get back to you.'"
Besides interest rates, the application spells out late fees, rate hikes and retroactive interest if you don't pay on time.
Stewart says consumers should keep in mind that opening store cards can ding your credit score more than a traditional card. The only way they can work in your favor is if you pay it off before interest accrues, he said.
"Don't carry a balance," Stewart said. "Make sure you pay that off as quickly as possible."
These cards can be easier to qualify for, which may make them one way for people with money struggles to improve their credit scores. However, financial experts say consumers must not charge more than they can afford to pay off monthly.
Still, the ease in obtaining store cards is also driving interest rates higher as consumers who can't keep up with payments default.
