Nearly 40% of consumers regret signing up for a store credit card that carries a higher-than-usual annual interest rate.
A growing number of consumers are considering applying for a store credit card to try and offset the financial strain on their wallets during the upcoming holiday shopping season.
According to the latest data from LendingTree, 35% of Americans are likely to apply for such cards this year, up from 29% a year ago. This is the second highest percentage in the five years LendingTree has tracked data.
Matt Schultz, chief credit analyst at LendingTree, told FOX Business that the data is “pretty surprising” given the fact that “there were reasons to write an obituary for in-store credit cards in the last couple of years after purchase.” now, pay later, phenomenon.”
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According to Schultz, “buy now, pay later” — which allows consumers to pay for purchases in interest-free installments — has been eaten away by the use of credit cards in the past.
The recent interest in store-bought credit cards “may suggest that people are looking for a little more help to … increase their holiday budget and be able to afford to do a little more after all the inflation,” he added.
However, LendingTree found that 37% of people who had purchased a credit card from a store in the past regretted the decision. According to the data, about 14% of them say that this has happened to them several times.
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First, these cards have always had a higher annual interest rate than regular credit cards, and those rates are only getting worse. According to LendingTree data, the average annual return on a new store card has risen to 26.60% from 24.27% in the last year.
That’s “significantly higher” than the rates for all new credit card offerings, which are around 22.21%, according to LendingTree.
The average bid for new store cards in 2022 is the highest since LendingTree started tracking data in 2018.
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These cards will always have higher APRs, Schulz said, because retailers want to make these cards available to all customers.
“In order to make them available to everyone, they have to make the interest rate high in order to protect themselves and manage their risk,” he said.
These cards also usually have a single bet rather than a range.
“For conventional credit cards, the vast majority have a number of the most feasible documents to be able to make sure that a person with a credit score of 800 can get a lower rate, while a person with a credit score of 600-650 pays a higher one. speed,” Schultz said.
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These cards, unlike regular credit cards, “are generally very popular with people for whom other options aren’t as good,” he added.
For example, buyers with damaged or no credit may not be able to get other types of credit cards. These store cards are a way for shoppers to increase their credit and then move on to other credit cards, Schultz said.
Credit: www.foxbusiness.com /