Nearly three in ten Americans applied for a store credit card during the 2018 holiday season, according to a CompareCards.com report.
Thirty-two percent of people who applied were not approved. Of those who were approved, nearly half said they would pay off their card in one month or less.
Younger millennials (ages 22 to 29) were the largest demographic to apply for store cards, but they were also more likely to be rejected, according to the report.
Store credit cards are nothing new, but the number of shoppers who applied for one during the 2018 holiday season exceeded expectations. The CompareCards.com study revealed that consumers were tempted by the cards even though they come with an average annual percentage rate of around 25%, making them a very lucrative opportunity for retailers.
“The number of people who applied did surprise me,” CompareCards.com Chief Industry Analyst Matt Schulz said in an interview with Retail Dive. "It’s a lot of people signing up for store credit cards even though I feel like a lot of the word has gotten out that for most people these cards aren’t a great deal.”
While the common perception is that millennials are eschewing credit cards, and thus disrupting the industry, this holiday season they led the way with the trend. There may be a few reasons for the behavior, Schulz said, including they want the deals or reward points that come with opening a store card. Additionally, it can be easier for a young adult to obtain a first credit card through a retailer than through other available options.
A number of retailers have introduced credit cards or revamped such programs in the past year. Lucky Brand launched one through Alliance Data Systems Corporation, Ikea offered one with cash back within the Ikea ecosystem and Walmart forged a new partnership with Capital One.
In the fall of 2018, another CompareCards.com study revealed that nearly half of all Americans who have a store credit card regret owning it.
“If you can’t pay off the balance on a store credit card at the end of every month you are just asking for trouble,” Schulz said.