You have likely participated in the promotion where if you apply and open a credit card, you get an additional amount or percentage off your order. Stores make it highly enticing to open a card with them. Take Target, for example. Their RED Card offers you an additional 5% discount on purchases plus other perks. However, watch out for the APR (Annual Percentage Rate) on these credit cards.
Let's break down how APR works. If you pay your balance off in total, there is no interest. However, if you carry a balance, you will accrue daily interest. This balance is calculated by taking your interest rate and dividing it by 365 days. For example, let's say you entered the month with a $350 balance remaining on an account with a 15% APR. Your end-of-day balance after the first day would be $350. Assuming you made no purchases or payments, your balance at the end of the second day would be $350, plus $0.14 in interest that accrued on the previous day's balance ($350 *(0.15/365)). You can learn more about APR here.
If you're looking to open a credit card, do your research and compare interest rates. While some places may have competitive rates, retail credit cards can have interest rates of 20% or more. American 1 Credit Union offers very competitive rates and no fees to get started; learn more here.
