Interest in store credit cards plunged in 2021, according to a new report from LendingTree. However, consumers are still slightly more likely to use store cards to shop during the holidays than trendy buy now, pay later loans.
Key findings
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Interest in applying for store cards drops to its lowest level since 2018. Just 29% of consumers say they’re likely to apply for a store credit card this holiday shopping season, compared to 44% in 2020, 32% in 2019 and 24% in 2018.
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Debt falls, too: Just 1 in 3 with a store card said they currently have debt associated with that card. This is a big decrease from 49% in 2020.
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42% of consumers have closed a store credit card. An additional 13% have had a store card closed by the issuer. The main reasons for voluntary closures were no longer shopping at the store (46%) and high interest rates (35%).
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Average store credit card interest rates remain high, though largely unchanged. The average APR on a new retail credit card offer was 24.27%, up only slightly from 2020’s 24.24%.
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Consumers still prefer store cards over buy now, pay later, but it is close. 29% of consumers would be more likely to pay with a store card this holiday season, while 21% would turn to buy now, pay later financing.
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More retailers offer store credit cards than buy now, pay later loans, though many offer both. 67 of the 126 retailers’ websites we reviewed offered a store credit card, while 53 offered a BNPL loan. However, 40 retailers made both options available.
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Buy now, pay later options pop up in unexpected places. Paying in installments at department stores and big-box retailers, sure — but doing so at Dollar Tree or Panera Bread? Yep, it’s possible there, too.
“Store credit cards and “buy now, pay later” loans can both be useful tools if used wisely,” said LendingTree’s chief credit analyst, Matt Schulz. “They can offer some much-needed short-term flexibility for families that might need a little bit of help stretching their budget. However, like many financial tools, they’re also dangerous when used carelessly or recklessly. Take time to research and understand what you’re getting into.”
To view the full report, visit: https://www.lendingtree.com/credit-cards/study/store-card-survey-holidays/.