There’s been a lot of feelings swirling around the rumored GameStop credit card today. It’s an uncomfortable mixture of anger, panic, and scoff-tastic remarks on GameStop’s clawing business practices and unfair gaming deals. While I’ve had my fair share of pre-order pleas at my local GameStop register, I can’t say this credit card plan is outrageous in the grand scheme of retail credit deals.
Much of the panic revolves around the 26.99% APR. If you’re not clear on the workings of an Annual Percentage Rate, it’s a little more complicated and variable than those “Sally bought 10 watermelons for $10, at 5% interest…” questions we did in middle school. Bank of America has a nice summary of the process if you want to brush up.
So, here’s the deal. Yes, the average APR for fixed rate credit cards holds at 13%, and 15.7% for variable rate cards (according to Bankrate). Citing those numbers, unfortunately, is pretty misleading. Retail credit cards typically have a notably higher APR than standard bank cards. Here are some examples:
Best Buy credit card: 25.24%-27.99%
Victoria’s Secret credit card: 24.99%
Macy’s credit card: 24.50%
Even though GameStop’s offer is standard retail card rate, it’s worrying when people begin calculating bad scenarios of interest accumulation. Take this example, which has been popping up in social media:
“Lets say you use the card to buy one game at the retail price of $60, once a month for a year. That’ll cost you $720 in total, but it’ll also take you eight years to pay it off, and you’ll be forking out another, wait for it, $914 in interest.”
To be fair, APR’s in the mid-20′s is typical for retailer cards. Nobody in their right mind should be charging often on them and paying the minimum for years at a rate like that. That kind of finance management would give you interest issues with most cards, retail or not. This scenario shouldn’t happen. Nobody should take on that much debt, for that long, if the resulting interest charge disgusts them.
That’s the point of the credit system, it’s a charge. You get to avoid payments, for a fee. Knowing your APR, you ought to balance your payments and fees to a point that is comfortable for you and your standards of credit costs. Is it unfair for the credit cost to run at 27%? Compared to other retailers, it doesn’t seem out of place.