As annual credit card debt in the U.S. is expected to soar to a record-setting $80 billion this year, retailers are enticing consumers this holiday shopping season with attractive deals to get shoppers to enroll in their store credit cards.

Many of those deals include deferred interest plans, but companies are not always transparent about this to consumers, according to WalletHub’s 2016 Store Credit Card Landscape report. Analysts at the credit reporting firm also cited Amazon Inc., Toys ‘R’ Us and TJX Cos. Inc. as the best store credit cards for consumers.

In the report, the firm warned consumers of some of the trappings of deferred interest plans.

“Deferred interest plans typically offer zero percent introductory terms, but they come with a catch that distinguishes them from normal zero percent credit cards,” the analysts said. “If you leave even a $1 unpaid balance at the end of the introductory period or you pay one of your monthly bills a day late, interest will retroactively apply to your entire original purchase amount.”

The report went on to note that what consumers “initially thought was a great deal could quickly devolve into a holiday nightmare. But that shouldn’t discourage folks from ever using store-affiliated plastic, as some great discounts are available. You just need to know where to look.”

The report revealed that all of the major U.S. retailers that offer zero percent financing use deferred interest, and that “82 percent are issued by just three banks: Synchrony, Citi and Comenity.”

In regard to transparency of retailer programs, WalletHub said “Pottery Barn and West Elm are among the least transparent retailers about their use of deferred-interest financing while Apple, J.C. Penney and Kay Jewelers are among the most transparent.”

The report also found that about 99 percent of store credit cards do not charge annual fees, which compares to an average general-use card fee of $16.42. With the sign-on deals, the researchers said the average “store credit card that offers rewards in the form of discounts gives you a 19.27 percent initial discount and 2.9 percent off every purchase moving forward.”

2016’s Best Store Credit Cards

  1. — $10 initial bonus; 5% cash back on all purchases (Prime members); no annual fee
  2. Toys ‘R’ Us — 15% off your first purchase; 2 points per $1 spent (125 points = $5); no annual fee
  3. TJX Cos. Inc. — 10% off your first purchase; 5 points per $1 spent (1,000 points = $10); no annual fee
  4. Gap Stores — 15% off your first purchase; 5 points per $1 spent (500 points = $5); no annual fee
  5. Target Corp. — 5% back on all purchases; free shipping and 30 extra days for returns; no annual fee

Source: WalletHub

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