PhotoWhen checking out at a chain department store, the clerk might ask if you would like to open a charge account and get 10% off your purchase. Should you? Probably not.

Long before Visa and Mastercard were household names, most consumers carried a number of store charge cards. It made buying things easier, since you didn't have to write a check or pay cash, just about the only other options in those days.

So why shouldn't you have a store charge card these days? If you can qualify for a rewards or cash-back credit card, that's a much better deal.

Nearly 30% interest

In fact, CreditCards.com reports that store-branded credit cards are pretty expensive for consumers who carry a balance. For example, its latest study shows Big Lots charges 29.99% interest on its store card, Zales charges 29.24%, and Staples charges 28.24%.

The study found the average store card charges 23.84% interest, more than 8% higher than the average credit card. And while retailers usually offer consumers some kind of incentive to sign up for a card, it usually carries a value of around $25, the study found.

"With their outrageously high APRs, most consumers would be wise to steer clear of these cards unless they're 100% certain they can pay their balance off every single month," said Matt Schulz, CreditCards.com's senior industry analyst. "And even then, there are plenty of general-purpose credit cards with better sign-up bonuses."

Might help improve a credit score

True, but there is a useful purpose for a store charge card. For someone with weak credit, opening a store account, making a small purchase and immediately paying it off, can be a way to boost a credit score. Eventually, his or her credit score should be high enough to qualify for a credit card.

One reason store cards charge such high interest is they are easier to get than a regular credit card – for the lender, there's a higher risk. Having a store card or two and not running up a balance helps establish credit. But with such high interest rates, carrying a balance on these cards should be avoided at all costs.


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