Despite many store credit cards failing to offer comparative benefits, a new study shows that, on average, half a million new accounts are opened every year on Black Friday. As shoppers cause chaos in the rush for holiday sales, many use store cards to buy holiday gifts on credit.
Using credit cards to buy large items can be beneficial, especially when taking sign-up perks and bonuses into account. Using a store credit card in the wrong way, though, can result in increasing debt and interest rates that are typically higher than bank credit cards.
After analyzing the store credit card data for the past three years, Deutsche Bank chief international economist Torsten Sløk said that around 500,000 new accounts are opened on Black Friday. This compares to the U.S. average of 150,000 accounts opened on the other days of November. The average balance on store cards is $332 per household.
Store credit cards often provide great introductory deals, including interest-free periods and cash back. To optimize these savings, however, it is crucial to clear the balance on your card as soon as possible. This is because when interest kicks in on store cards, it is usually higher than on other credit card accounts, and can be backdated across the lifetime of outstanding balance - eroding any benefits the card might have offered. When shopping this Black Friday, consider whether you can afford to pay off your purchases and, if you take out a store card, ensure that you understand the terms.