The holiday season is one of the most tempting times of the year to sign up for a retail credit card. But are retail credit cards truly beneficial to post-bankruptcy debtors and other borrowers? Not really, except for the purpose of rebuilding your credit history. A matter of fact, according to a study conducted by Congressman Anthony Weiner, retail credit cards have even more disadvantages for consumers than bank issued credit cards.

The study surveyed credit cards at 35 major New York City stores and found the average rate was 23.83%, up from 21.71% in 2008. Radio Shack(RSH) had the highest APR in the survey at 28.99%. Staples(SPLS) and Best Buy(BBY) had cards with interest rates of 27.99%.

And those credit card rates are compared to the average bank issued credit card interest rate of 13.84 percent. Not only that; but having a retail credit card makes a post-bankruptcy debtor more likely to run up a large balances especially if the credit card is with their favorite store.

Let’s take a look at a few tips for avoiding the pitfalls of retail credit cards:

While retail credit cards can be a stepping stone to restoring your credit after bankruptcy, you really should not open more than one or two retail credit card accounts if possible. Anymore than two or three retail credit cards will actually begin to damage your credit rating.
If you open a retail credit card, open it at your least favorite store or at a store you won’t need to use often. I know that sounds counterintuitive; but the point of opening the retail credit card after bankruptcy is so it will be reported on your credit report, not as a means to rack up large amounts of debt.
Never hold a balance on your retail credit card. Remember, the interest rates are steep. Pay off your retail credit card balance every month.

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