Buyer Beware: In-store credit cards

(National) Jan. 18, 2005 - More and more stores are urging you to sign up for their credit card and the offers are enticing.

Macy's knocks 15% off everything you buy for the first two days. Best Buy promises no interest for up to two years. The Gap card has several benefits including a $10 reward certificate for every $250 spent.

Consumer Reports money adviser Lisa Lee Freeman says while those benefits sound fabulous, you should beware because their interest rates are often sky high, "They average 21%. So any freebies you get can quickly get wiped away by high interest charges if you carry a balance."

She says an even bigger concern is by getting another credit card, you could be hurting your credit rating, "Every time you sign up for a credit card, the credit card company is going to check your credit score and every time they do it's going to cause your score to go lower and that can cost you more down the road in terms of higher interest rates on home mortgages and auto loans."

Consumer Reports assessed 47 retail cards and found some do offer better deals, especially ones that are co-branded with Visa or Mastercard.

Target and Bloomingdale's both offer retail cards with the Visa logo. Radio Shack has a card co-branded with Mastercard.

That's far better than Radio Shack's regular store card that carries an interest rate of a whopping 23.85%.

Even with co-branded cards, limit the cards to the stores where you shop regularly.

Along with lower interest rates, co-branded cards also tend to offer more generous rewards, but retailers can change their reward program at any time, so be sure to read the notices that come with your bill.

Reported by Judi Gatson
Posted 6:01pm by BrettWitt

Copyright © 2005 Consumers Union of US, Inc. All Rights Reserved.