This post was originally published on Yahoo Money.
You know the drill: A cashier offers an easy and quick way to save money on your purchase. You jump, accept the pitch and open a store credit card.
It’s bait that Americans are biting in droves.
Shoppers opened 12.4 million new store credit cards in the second quarter, up 2.4% from last year and the first annual increase in 11 quarters, according to a report from TransUnion, the credit reporting agency.
The rush for new credit is a sign of thriving confidence among Americans, thanks to low unemployment, and will be a boon for retailers this November and December during holiday shopping, TransUnion forecasts.
Americans are expected to responsibly manage their store credit cards, which carry high interest rates, rather than roll over debt, TransUnion predicts.
In the 2018 holiday shopping season, shoppers charged $6.6 billion on their store credit cards but paid off all of it by the end of the following quarter. By contrast, shoppers only managed to pay off 30% of their holiday charges on their store cards just two years before that.
“It’s critical to point out that while consumers continue to make holiday purchases with their credit cards,” Matt Komos, vice president of research and consulting at TransUnion said, “they are paying off most of these balances within the next few months.”
Pitfalls of store cards
Still, store credit cards can come back to haunt shoppers looking for a quick discount. Buried in the store credit card sales pitch and literature is the eye-watering interest rate.
The average rate on a store credit card is just over 26%, much higher than the average rate of 21% for regular credit cards.
If you get sucked into the store credit card spiral and let your balances carry over from month to month, the attractive discount you got upfront on your first purchase will be erased because of the high interest you’ll pay.
Amid the holiday shopping frenzy, take a few moments to reflect on the financial impact of opening a store credit card on a whim.
Every credit card application means a lender will pull your credit report, called a hard inquiry that dings your credit score. If your 2020 plans include buying a new car or home, you want to keep your pristine credit score to secure favorable rates on those big loans.
Komos encourages shoppers to make the most of their time leading up to the holiday shopping rush, so you’re not caught flat-footed at checkout.
“Do some of that investigative work now,” he said, “so that if you are posed with that question, you already know your decision.”
Read more in our Credit Cards section