Discounts, special financing and pressure from salespeople convinced 37% of Americans to apply for a retail credit card during the 2019 holiday season, according to a survey conducted by CompareCards.com. When CompareCards ran the same survey last year, only 28% of Americans did the same. With the average retail card APR at 25.41% and only 28% of new store cardholders expect to pay off their first purchase within the first month, the increase in retail credit card applications could be cause for concern.
Key findings
- 37% of Americans applied for a store credit card this past holiday season, up from 28% the previous year.
- Just 28% of those who got a new store credit card during the holidays expect to pay their first purchase off within a month. That’s down from 49% in the previous year.
- 14% of those who applied said they were pressured into it by the cashier. The most common reasons for applying? Fifty-four percent said they did so to take advantage of a special discount, and 27% said they didn’t have the funds to otherwise pay for holiday shopping.
- Men were nearly twice as likely as women to apply and be approved for a store card this holiday season. 40% of men said they done so versus just 22% of women.
- Only 6% of consumers who applied for a retail credit card were denied, down from 9% during the 2018 holiday season.
Not only are more Americans applying for store credit cards, far more who got them say they won’t be able to pay their first purchase off in under a month.
That means that more Americans will still be paying off their holiday debts when February and March roll around. It also means they’re in danger of having interest payments outweigh any perks and savings they received when they first signed up for the card.
More applications, fewer rejections
More than 3 in 10 Americans (31%) successfully applied for a store card during the holidays, while just 6% had their application denied. During the 2018 holiday season, those numbers were 19% and 9%, respectively. That means that if you applied for a card this holiday season, your chances of getting it were even better than last year.
Discounts are the major driver for store card sign-ups
Even with the high APRs and lower credit limits, Americans still can’t resist store cards and the promise of a big discount or exclusive access. And it isn’t just one subset of Americans: 51% of millennials applied, as did 43% of Gen X, 57% of parents of kids under 18 and 45% of men.
Reasons for signing up for a store card:
- 54% wanted to take advantage of special discount
- 28% didn’t otherwise have funds to cover holiday shopping
- 17% because the card offered a 0% APR introductory period
- 15% because it’s a frequently shopped store
- 14% due to pressure from the cashier/salesperson
- 1% Other
Paying off store card balances
If you can pay your purchases off quickly, those big discounts and special financing offers from store cards can be a good deal. The problem, however, is that far too many people carry a balance on these cards, and the problem is getting worse.
- Only 28% of those with a new store card expect to pay their first purchase off in under a month. Last year, that number was 49%.
- 29% expect to pay it off in 2-3 months, up from 19% in 2018
- 23% expect to pay it off in 3-6 months, up from 15% in 2018
- 15% expect it to take more than six months, up from 11%
- 5% said they have yet to make a purchase with the card
“If you’re struggling with credit card debt already, it’s probably wise to steer clear of retail credit cards,” said Matt Schulz, Chief Industry Analyst at CompareCards. “The math just doesn’t work in your favor if you regularly carry a balance. A 15% discount on a purchase doesn’t matter much if you’re paying 25% in interest. But if you do give in, make sure you understand the basic card details – rates, fees, deadlines, etc. And if you have good credit, consider moving your store card balance to an introductory 0% APR balance transfer credit card. It can be a great way to keep interest from piling up too quickly.”
To view the full report and for more information, visit https://www.comparecards.com/blog/holiday-gift-giving-guilt-survey/.
Methodology:
CompareCards commissioned Qualtrics to conduct an online survey of 1,120 Americans, with the sample base proportioned to represent the overall population. The survey was fielded Dec. 20-23, 2019.
