In the throes of holiday shopping, you're sticking to your list and tracking your spending. Will you be derailed by the offer of a new store credit card?
At the cash registers of many stores, clerks will ask if you would like to sign up for their store's card and get a discount on that day's purchases. It may come with a teaser initial interest rate — perhaps 0 percent for six months.
If you get such a pitch, the first thing you need to do is ask about the regular annual percentage rate. And don't be shy about it.
These credit cards can come with interest rates as high as 28.99 percent, according to a study just completed by the office of Rep. Anthony Weiner, D-N.Y., a member of the House Energy and Commerce Committee's commerce, trade and consumer protection panel.
Among the 35 store credit cards surveyed, the average APR was 23.83 percent, up from 21.96 percent in 2008, the last time Weiner did the survey. The average APR for all credit cards is 14.78 percent.
Weiner has introduced legislation that would require stores to disclose interest rates, grace periods and annual fees when making their initial pitch.
Overall, service members tend to have more credit cards than do civilians, according to a 2009 survey by the Financial Industry Regulatory Authority, which just released these military results:
• Forty-two percent of service members have two or three credit cards, compared with 26 percent of the civilian population.
• Thirty-two percent of service members have four to eight credit cards, compared with 23 percent of the civilian population.
The survey did not categorize whether these were store cards or major credit cards, but chances are a few store cards are in the wallets of those surveyed.
Before you step up to the cash register, here are some things to contemplate — good and bad — if you're offered a store card:
• After asking about the annual percentage rate and fees, think hard about the possibility that you might not be able to pay off that card each month. If the interest rate is 28.99 percent and you buy a $100 coat, it will cost you at least $128.99 if you haven't paid it off after one year.
• If you pay by cash, check or debit card, you don't have finance charges.
• Think about the other cards in your wallet. Chances are their interest rates are lower. And you may have a card that offers cash rewards or other benefits. If you pay both cards off each month, you might come out ahead with the rewards card.
• How often do you shop in the store? Depending on the terms of the card, you might benefit from the store's frequent discounts offered just to cardholders. Conversely, will you be tempted to buy stuff you can't afford if you carry that store credit card and get inundated with offers?
• Choose carefully among store credit cards. For example, the Military Star card, which carries an interest rate of 10.24 percent, can be used at all military exchange outlets.
The rewards card version, the Military Star Rewards MasterCard, can be used at any outlet on base, with two rewards points per dollar spent. Outside the base gate, it returns one rewards point for every dollar spent. This card has tiered interest rates based on creditworthiness, between 8.24 percent and 13.24 percent.
• Will your credit score withstand another credit card?
"Getting that 10 percent [discount] at the register can have a lasting impact," said Gerri Walsh, vice president for investor education at the Financial Industry Regulatory Authority.
"Every time you open up a new credit account, a couple of things happen," she said, including a hard credit check, which causes your credit score to dip, although it will recover.
Still, Walsh said, "to the extent you have a lot of open lines of credit, at some point that's viewed negatively by the next lender."
You'll be bombarded with sales pitches from all directions this holiday season. Keep your eye on the prize: your financial well-being.
Questions or comments? firstname.lastname@example.org?subject=Consumer%20Watch:%20Making%20sense%20of%20store%20credit%20cards">E-mail staff writer Karen Jowers.