You’ve heard of buyer’s remorse when it comes to things people buy.
But you may not know that people can experience those same regrets because of the way they choose to pay for their purchases.
One frequent culprit: retail credit cards.
Purchases made with those accounts will likely end up costing consumers more due to the high annual percentage rates that often come with those credit cards, according to new research from CreditCards.com.
The average APRs for those cards have come down in the past year, though non-retail branded general credit cards are still a better deal, the website found.
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The average retail credit card APR dropped to 24.43%, down from 26.01% last year. The average store-only credit card APR fell to 25.9% from 27.52%. Co-branded cards are now at 22%, versus 23.39% one year ago.
Non-retail credit cards, however, have an average APR of 19.69%, compared to 21.1% last year.
Many consumers admit they are not shopping around for the best rates. CreditCards.com found 43% of adults have spontaneously applied for a retail credit card when checking out at the register.
The most common reason why they do is to get a discount or promotional offer, with 60%. Other motivations include financing a purchase over time, 29%; building their credit score or history, 26%; because they love the store, 20%; feeling pressured by a store employee, 8%; or thinking they were signing up for a store loyalty card, 7%.
It pays to pause before signing on for such a deal, according to Ted Rossman, industry analyst at CreditCards.com.
Your first priority should be paying off your bills in full, rather than any potential rewards you may receive, Rossman said. That means paying the entire balance when it comes due.
Paying high interest rates on a purchase even for a month or two can wipe out the benefit of any rewards.
“The discount today can often sound better than it is,” Rossman said.
Another key reason to be wary of retail credit cards is the deferred interest rates they sometimes apply. Take a 0% interest for 12 months offer, for example. If you don’t pay the full balance back within that time frame and deferred interest is in the fine print, the issuer can charge you retroactive interest on your daily balance starting from when you first made the purchase.
General credit cards often offer 0% deals with no deferred interest. Consequently, shoppers may want to consider those first, Rossman said.
Some currently offer 18 months with no interest on new purchases, including the Citi Diamond Preferred Card, Citi Simplicity and U.S. Bank Visa Platinum, he said.