Financial Planning for Generation X & Y Women
 
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Expert Q&A Archive

01/10/2008
Why do store credit cards charge so much interest?
Why are store credit cards allowed to charge so much more interest than a regular Visa or MasterCard?
Bettye J. Banks:
expert info »
Interest is a moving target. Generally, the range of rates doesn't vary too much, but you can certainly negotiate with your credit grantors. If they choose not to give you a break, pay off the account and do not make any future credit purchases with them. You have to remember that the retail merchants already make a profit on the sale of goods. The mark-up on retail items is quite high. When you buy on credit you pay more than twice! You pay the cost of the product, the mark-up (including overhead) and the revolving interest on the account, a huge amount!
Bear in mind that any interruption in the orderly payments on any major credit card account can generate a much higher interest rate, so always pay at least the required minimum on time.
Jody Rorick, CPA:
expert info »
They have different usury [the practice of lending money at an exorbitant interest rate] rules than banks and can charge up to 3% more than banks. They might be compensating themselves for generally poor credit of their customers and for low cardholder balances.