If you’re doing your holiday shopping in person this year, you may be asked at checkout if you want to sign up for a store credit card.
That’s an attractive offer. You can usually apply directly at the register, and doing so often gives you a significant discount on your purchase. But before you sign anything, you need to know exactly what kind of deal you’re getting, says Ted Rothman, a senior industry analyst at Bankrate who specializes in the credit industry.
“It’s definitely a big buyer, so be careful,” he says. “Many of us will be offered these at the checkout counter this holiday season. Most of the applications for these retail cards will take place in the fourth quarter.”
Some retailers offer interest-free grace periods to encourage consumers to sign up, which can be a huge benefit. According to recent research from WalletHub, about 80% of store cards with 0% APR offers come with so-called “deferred interest.” Essentially, if you have a balance at the end of the grace period, you will be charged retroactively for all accumulated interest.
“Deferred interest is a really tricky trap because a lot of people don’t understand what it means,” Rothman says. If you don’t know the rules, he says, you could end up spending much more than you saved on your first purchase.
“The amount can be huge, especially for big-ticket items,” Rothman said.
What you need to know about deferred interest
To encourage you to sign up and make purchases with your store card, some retailers offer introductory offers of 0% APR, typically for 6 months to 2 years.
But if you receive such an offer, be sure to read the fine print, says Rothman.
According to Rothman, there are some important terms to be aware of. The most common are “deferred interest,” “no interest if paid in full,” and “special financing.”
they all mean the same thing. If you have a balance on your card, it must be paid off in full by the end of the introductory period. Otherwise, you will be charged retroactively the interest owed for each month you had the card.
Retailers say these cards benefit consumers who use them responsibly.
“Reading the terms and conditions of any financial product or credit offer is essential,” said Dylan John, senior director of government relations at the National Retail Federation. “We think of these as customer-friendly programs that allow people to make purchases that they wouldn’t be able to make with a regular credit card.”
Still, retroactive interest could make retail cards that offer these interest rates more disruptive than bank-guaranteed cards with 0% introductory periods, Rothman says.
For bank-guaranteed cards, “if you still have the card at the end of the period, you’ll get charged an advance, but you won’t get it back,” Rothman says. If you’re looking for the financial flexibility to carry balances on big-ticket items this holiday season, these cards are probably safer than deferred-rate cards, he says.
If you choose a store card with deferred interest, plan to pay it off in full before it expires. A common strategy for cards with introductory periods involves taking the balance and dividing it by the number of months in the validity period to make consistent payments.
Rothman suggests taking one more step. If it’s a 12-month offer, pretend it’s an 11-month offer.
“One safe bet is to pay it off at least a month early and try to get a zero on your final statement,” he says. “That way, there are no miscalculations or rounding errors. There is no room for adjustment.”
Other disadvantages of store cards
WalletHub writer and analyst Chip Lupo says store cards are generally not a good idea for people who tend to carry credit card balances. “They tend to have very high interest rates,” he says.
According to Bankrate, the average retail card has an annual interest rate of over 30%, which is 10 percentage points higher than the average credit card interest rate.
Additionally, store cards tend to have lower credit limits, “so you can easily max out your card on one purchase, which can negatively impact your credit score,” says Lupo.
For shoppers keen to pay by card, these may not be deal-breakers. According to WalletHub, a quarter of store cards offer some form of perk, usually in the form of points. Earning cash back when you shop at your favorite stores isn’t necessarily a bad idea, says Rothman.
“If you’re store loyal and like getting 5% back every time you shop with your card (at your favorite store), there’s an everyday use case where that could work,” he says. “It’s just that you’re expected to pay it back before interest accrues.”
Want to improve your AI skills and increase your productivity? Get 25% off our most popular course of the year, How to Be More Successful at Work with AI, using coupon code GETSMART. Offer valid from November 17th to December 5th, 2025.
Plus, sign up for the CNBC Make It newsletter for tips and tricks to succeed at work, money, and life, and request to join our exclusive community on LinkedIn to connect with experts and colleagues.
