NEW YORK (AP) As you approach the checkout counter with your arms full of sweaters or toys or other purchases for the holidays, it's not uncommon for the sales clerk to offer you a deal 10 percent off your bill if you open a store credit account.
It may be tempting, but consumer experts say there are a lot of reasons you should say ''no.''
''The carrot they dangle in front of shoppers is an initial discount for signing up for a store card,'' said Greg McBride, senior financial analyst at Bankrate.com in North Palm Beach, Fla. ''But they can offer a 10 percent discount because they're charging interest rates that are 20 percent or more on the cards.''
By comparison, the average rate on a standard Visa- or MasterCard-branded bank card is about 14 percent.
Here's how the math works on a retail card, according to McBride. Let's assume you take the offer on $1,100 worth of goods on a card carrying a 20 percent interest rate. You get $110 off and end up with just under $1,000 on your new card. If you make a minimum payment each month for 12 months, you'll have accumulated interest of $191 at the end of a year. So was the $110 discount worth it?
Another possible negative is that accepting a lot of retail credit card offers in a short period of time can lower your credit scores, McBride said. These scores are derived from reports kept by the major credit agencies, including Experian, Equifax and TransUnion, that track the amount of debt consumers have. The lower a score, the higher the interest rate consumers will be charged on loans.
''If you're thinking of taking out a car loan or a mortgage in early 2005, you might think twice about taking out new credit cards now, regardless of that initial discount, because it could cost you a lot more when you borrow next year,'' McBride said.
That isn't to say that some consumers shouldn't consider the retailers' offers and millions do.
Robert McKinley, chief executive of CardWeb.com Inc., an online publisher of payment card information based in Frederick, Md., said there are more than 500 million store cards in circulation, compared with about 640 million bank cards.
Outstanding balances on the retail cards, which generally have lower credit limits than bank cards, total about $80 billion, compared with $680 billion on bank cards, he said.
''The reason there are so many store cards is that a lot of people take them to get the upfront discount, then squirrel them away in a sock drawer and forget them,'' McKinley said.
The retailers offers are most advantageous to consumers who pay their credit cards in full every month, because they get the benefit of the discount and don't have to worry about the high interest charges on unpaid balances, McKinley said.
They also can be good for young people who haven't established much of a credit record and for consumers with blemished credit records, McKinley added.
''These are sales driven, so just about everybody can qualify for a card, if only for a couple hundred dollars limit,'' he said.
Consumers with established credit ratings will find better interest rates on bank-issued credit cards or those retail cards that carry Visa or MasterCard logos.
When it comes to retail cards, consumers should be selective, said Curtis Arnold of Little Rock, Ark., founder of the CreditRatings.com consumer information site. He suggests consumers choose only the cards at stores they often visit or that offer the best deals, including upfront discounts or zero percent interest for several months.
''If you're making a large purchase, say at Home Depot, and they offer you a one-time rebate, that could be a valuable thing,'' Arnold said. ''But if you're at the Gap with $100 worth of clothes and they offer you 10 percent, that $10 shouldn't entice you to apply for yet another credit card.''
On the other hand, if you're a frequent Gap shopper and want to be included in seasonal promotions and future rebate offers, ''then accept that one but don't let yourself be pressured into signing up for a dozen others,'' he said.
Arnold points out that retail store card promotions vary greatly, and the discount and interest rates on offer today could change tomorrow.
''The retailers count on impulse, but don't feel you have to sign up on the spot,'' Arnold said. ''Take the application home, study the terms and think it through.''
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