You probably have a few of them in your wallet right now — those store credit cards that you opened at the register because you got 10% off your purchase, right on the spot.
Well, according to a new analysis from Moody's Investors Service, you may start to see a lot fewer retail cards being offered. The culprit? The retail industry's poor financial outlook. Companies like JCPenney, Macy's and Staples are shuttering locations in droves, and more than 8,600 brick-and-mortar stores could close in 2017.
And with retailers' physical locations gone, consumers don't have a reason to use that so-called private-label credit card as much as they used to. Moody's analysts also don't think a switch to online shopping will be enough to prevent loss of business for the retail card industry.
But having fewer retail credit cards — or at least, not using them as much as you used to — can actually be a good thing for your finances. Here's why.
Retail cards tend to have higher interest rates than regular credit cards. According to CreditCards.com's 2016 Retail Card Survey, the average annual percentage rate (APR) on a store credit card was 25% — much higher than the 15.18% average APR across all credit cards.
Their "special offers" could end up costing you. Retail card companies were recently given a slap on the wrist by the Consumer Financial Protection Bureau because they often dangle deferred-interest offers in front of consumers without properly explaining what that means. (In a nutshell: You don't pay interest on your purchases for an introductory period, but if you have any outstanding balance left at the end of that period — no matter how small — you're then back-charged interest on all the purchases you made in that time frame.)
They tend to have lower credit limits. Generally speaking, retail cards carry lower credit limits than traditional credit cards — sometimes only in the neighborhood of $500, according to the CreditCard.com study. This means if you spend a lot on a retail card, it could look like you're close to maxing out your limit — which may hurt your credit utilization ratio, and thus, your credit score.