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• Almost half of consumers plan to apply for a credit card in-store during the next holiday shopping season.
• Store credit cards have very high interest rates – up to 24% on average – but they may make sense to some shoppers.
• If you are applying for a new store credit card, read the fine print and make sure you make the most of your reward opportunities quickly.
• View Business Insider’s List of Best Rewards Credit Cards »

As Americans gear up for a different kind of holiday shopping due to the pandemic, many aren’t just planning to ask Santa to go to the store for them. They plan to ask the store if they can add a new piece of plastic to their wallet.

A new to study from CompareCards by Lending Tree shows that 44% of shoppers are at least somewhat likely to apply for a credit card in-store during the holiday season. Two years ago, that figure was only 24%.

With high APRs, store credit cards aren’t always as good as finding the perfect gift on the clearance rack. Here is an overview of four key questions to help you determine if an application makes sense.

How loyal have you been to the store in the past?

Before you decide to apply for a store credit card, take a look at your past spending. Are you a regular customer all year round, and not just during the holidays? If so, it may be worth it.

Ted Rossman, industry analyst at CreditCards.com and Bankrate, says the best deal he sees for in-store credit cards is 5% cash back. Target’s RedCard, Lowe’s Advantage Card, and Macy’s Credit Card are some of the retail credit cards that give you 5% back when you shop there.

“If you’re loyal to this store, it’s actually a good deal,” says Rossman. “As long as you don’t overspend and go over budget, it can pay off.”

In some cases, Rossman points out that the more you spend, the more rewards you can earn. For example, Macy’s and Nordstrom both have a tiered reward structure with their credit cards.

Are you trying to build your credit?

If you have a limited credit history, a store credit card may be a good choice to help build your financial profile. “It’s often easier to be approved for a store credit card,” says Rossman. “This partly explains why banks and business partners charge higher interest rates. “

With these easy approvals, however, there are some potential drawbacks. “These often have very low credit limits,” says Rossman. “It’s easy to maximize a store credit card, which can be very damaging to your credit score. “

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Are you making a big purchase?

If you’re one of the shoppers who still plan to make in-person purchases this holiday season, Rossman cautions against being lured in by an offer to save at checkout.

“Go with a plan,” he says. “Many stores might try to entice you with 10% off your purchase. If you are buying a household appliance or large piece of furniture, it might make sense. But don’t lose the app if it’s a store you might never visit again. “

Could deferred interest come back to haunt you?

While that 10% per day discount might sound tempting, Rossman also warns of a trap that can be buried in the fine print: deferred interest. If you don’t follow Rossman’s Rule # 1 of paying off your balance in full, the card contract may mean you may be charged interest retroactively from the day you opened your account.

For example, consider the language that accompanies The Home Depot’s offer for “no interest if paid in full within six months.” The asterisk includes a warning that “Interest will be charged on your account from the date of purchase if the purchase balance is not paid in full.”

Let’s say you make a purchase of $ 1,500 in November and you still have $ 50 to pay at the end of May. You should have paid interest on the entire $ 1,500 – not just the remaining $ 50.

Beware of bankruptcy hindering your rewards

If you end up opening a store credit card over the holiday season, don’t let your rewards dust off. The recent wave of personal bankruptcies – J. Crew, Neiman Marcus and Century 21, to name a few – should remind us to use these statement credits and cash back opportunities as soon as possible.

“If you’re sitting on a stock of reward points,” Rossman says, “there’s a risk they’re worthless if the store is gone.”

David McMillin has written on credit cards, mortgages, banking, taxes and travel for the past 10 years. Its goal is simple: to help readers understand how to minimize fees and maximize rewards.
Besides writing for Business Insider, Bankrate, and The Points Guy, David is a musician, which means he’s spent way too much time worrying about money. He applies the lessons he’s learned from budgeting and sign-up bonuses to offer practical advice for personal finance decisions.
David is based in Chicago. When travel returns to normal levels, he has to travel to four other states – Alaska, Utah, Oklahoma and Vermont – to check the 50 on his list.

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