Most shoppers know the routine: It's time to check out and the cashier (or website) offers a discount if you sign up for the store credit card.
The offer can be hard to refuse, but experts say some shoppers should do just that.
Signups for retailer credit cards soar during the holidays. But the cards' perks don't always outweigh the downsides for everyone.
Here's what to consider:
HOW THEY WORK
Retailer credit cards work in one of two ways.
Cards that can only be used for purchases at that chain — like Target or Macy's— are known as "closed-loop" cards.
"Open loop" cards, on the other hand, such as the Amazon Prime Rewards Visa or the Capital One Walmart Rewards card, can be used anywhere but tend to earn better perks at the named retailer.
Holidays are when Americans tend to shop the most, so it's no surprise that signups for credit cards jump at the end of the year.
Credit reporting agency Transunion says that credit card originations jump in November and December for both general and private label cards. But those associated retailers tend to be more sensitive to the holiday surge, said Matthew Komos, vice president of financial services, research and consulting at Transunion.
Transunion has studied this issue for several years and found that private label card originations can double during the holiday period. For department stores and clothing stores alone last year, originations were 65% higher during the two-month holiday season compared with the rest of the year.
There are some perks to retailer cards.
A closed-loop card is easier to acquire than a traditional credit card. That's good news for folks who are just starting to build, or rebuild, their credit.
The cards can save you significant money if you are making a large purchase — say a refrigerator, mattress or a particularly large haul of goods. The discount and loyalty perks can also be a good thing if it's a store you already shop at regularly.
Other benefits vary by card, and include free shipping, early access to sales or more generous return policies. Nordstrom, for example, offers its loyalty members and cardholders curbside pickup for purchases and free alterations.
There's also a quick approval process, which is appealing in the rush of holiday shopping.
The most notable downside of store cards is interest rates.
The average interest rate on a retail card is about 26 percent, compared with 21 percent for a traditional credit card, according to Ted Rossman, industry analyst at Creditcards.com.
That's just the midpoint of the range based on credit worthiness, Rossman warns. Some branded cards easily run into the 30 percent range.
That's no big deal if you pay your card off in full each month, but for people that carry a balance, it can be a big expense.
Also consider your credit score. Too many inquiries could lower your score slightly and too much debt can drag it down. Additionally, store cards typically come with much lower credit limits than a normal card, which means if you run up $400 on your store card with a $500 credit limit, you could be hurting the utilization rate that goes into determining your score as well.
These cards may also encourage you to make purchases you wouldn't otherwise make, said Kit Yarrow a consumer psychologist and author of the book "Decoding the Consumer Mind."
Having a store credit card might incite you to make a purchase there rather than shop for the most competitive price, she said. You also open yourself up to more marketing, which may induce you to buy more than you can afford.
Consumers predominantly sign up for these cards on impulse, but their financial impact is long lasting.
Yarrow urges shoppers to stop and consider if they just want the discount versus really needing another credit card. And that can be hard to do during the holiday rush.
"There's a two-month period of time where rational people become a little insane and it's during holiday shopping," she said.