Retail credit card interest rates rise to record highs, topping 30% APR

Swipe-happy shoppers beware: Those enticing retail credit cards from your favorite merchants may put a bigger dent in your wallet than ever before. 

That’s according to Bankrate’s annual retail cards survey that shows the annual percentage rate (APR) on retail credit cards this year has hit a record high of 28.93% on average, up from 26.72% in 2022. That’s well above the average APR of 21.19% for all credit cards, the survey shows. 

The rising APRs come as the Federal Reserve continues to hike interest rates, indirectly increasing the cost of borrowing for consumers and emboldening credit card companies to raise their cards’ interest rates as well, Ted Rossman, Senior Industry Analyst at Bankrate.com, said in a statement. 

Card companies emboldened by Fed hikes

“[An APR of] 29.99% was an artificial barrier that few dared to cross — for psychological reasons, mostly, but the market has blown past that threshold given the Fed’s aggressive series of interest rate hikes,” Rossman said. 

Bankrate surveyed 107 retail credit cards in mid-September 2023, using publicly available terms-and-conditions disclosures. The survey includes each of the 100 largest card-offering retailers, as defined by the National Retail Federation based on 2022 sales. For cards offering an APR range, the midpoint of that range was used to calculate the average APR for all credit cards.

Retail credit cards are cards offered by a specific retailer alone or in partnership with a major bank that offers shoppers rewards for shopping at their stores, according to Bankrate. But while the cards may offer benefits to frequent shoppers who are able to pay off their card balances immediately — avoiding interest, those same cards can cause a lot of damage to cardholders who rack up interest charges on unpaid balances.

“If you ever carry a balance, a retail credit card probably isn’t the best choice for you,” Rossman said. 

Drowning in debt 

According to Rossman, if a credit card holder finances a $1,000 purchase at the average retail card interest rate of 28.93% and only makes minimum payments, that cardholder will owe $715 and be in debt for 50 months. 

Most Americans are already in debt as they take out more credit card debt as they struggle with rising inflation, according to data from the Federal Reserve Bank of New York. In fact, Americans are buried in nearly a trillion dollars in credit card debt now owe nearly a tua record combined $986 billion on their credit cards, or 17% more than what they owed last year, the same data shows. 

Sky-high APRs

Sixteen retail credit cards charge an APR of 32.24%, according to the Bankrate poll, some of which include Banter by Piercing Pagoda card, the HSN Credit Card, Ross Mastercard and the Wayfair Mastercard. 

Two co-branded cards — myWalgreens Mastercard and the Ultamate Rewards Mastercard — follow a graded approach, with rates ranging from 23.24% up to 32.24%.