Dicks Sporting Goods credit card

Portrait of happy couple paying with credit card in store Blend Images/Alamy

It's not coincidence that most retail outlets promote store-branded credit cards. Why? It's profitable. Why? Because the consumer pays more - way more - for the privilege of using them when they carry a balance.

"Retailers dangle incentives like 15 percent off a purchase to encourage consumers to sign up for their credit cards, " said Matt Schulz, senior industry analyst at CreditCards.com. "But this often ends up being a bad deal. The much higher interest rates far outweigh the one-time discount for anyone who carries a balance."

The average retail credit card annual percentage rate is 23.23 percent. That's more than 8 points above the average credit card interest rate and more than double what consumers with good credit can get, according to a CreditCards.com survey released Thursday.

Consider this example from CreditCards.com, making the minimum monthly payment for a $1, 000 balance:

  • Average retail card. It would take more than six years to pay off the balance, and you'll have paid an extra $840 in interest.
  • Average non-store credit card. The balance would be paid off in less than five years, and interest payments would total $396.
  • Average lower-rate card. Using a card with an APR of 10.37 percent, the balance would be paid off in just over four years, and the interest paid would be $232.

CreditCards.com reviewed the top 100 retailers by sales volume, as tracked by the National Retail Federation. Out of the 100 retailers, 36 have store cards. The highest interest rates:

  • Office Depot (ODP) and Staples (SPLS) (27.99 percent)
  • Dick's Sporting Goods (DKS), HomeGoods, Marshalls, TJ Maxx (TJX), JCPenney (JCP), Toys R Us (26.99 percent).
Despite the staggering interest rates, CreditCards.com notes that consumers can still get value from retail credit cards. If you pay your balances in full, many of these cards offer rewards and other incentives, including specials just for cardholders.

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