Retail credit card interest rises to new record high ahead of holiday season

Credit card usage in the US has been rising as tight household budgets have been squeezed further by the cost of living. And now, some borrowers are facing record high interest rates.

As inflation eases and the Fed’s rate cut is anticipated, there may be relief for some borrowers, but for those with credit cards – or those tempted to get new cards to fund holiday spending – can expect the average APR for retail credit cards of 30.45%.

The record rate is up from 28.93% in 2023, 26.72% in 2022, and 24.35% in 2021 according to Bankrate’s annual Retail Cards Study. For store-only cards (typically only valid in a single retailer) the rate is 31.80%, up from 30.24% last year. For cards co-branded by a retailer and either Visa, Mastercard, or American Express, the average is 29.09%, up from 27.64% last year.

The average for all credit cards is 20.78%, highlighting the oversized debt burden of store cards.

"Thirty percent used to represent an unofficial ceiling for retail credit card rates, but now most retail cards have crossed that threshold,” said Bankrate senior industry analyst Ted Rossman. “The best way to use any credit card is to pay in full each month so that you avoid interest. That's especially true for retail cards.”

The highest retail credit card APR in Bankrate’s 2024 study is 35.99% which includes the Academy Sports + Outdoors Credit Card, Petco, Burlington, Piercing Pagoda, Good Sam, Big Lots and the Michaels Credit Card. The lowest rate is 10.00% on the Amazon Secured Card followed by the Military Star card at 15.49%.

A report earlier this year found that millions of Americans are finding it harder to save while adding to their debt burden with increased credit card usage.

With stores launching aggressive marketing campaigns to get dollars into their stores at the most important time of the year, one tactic used by store cards but not general-purpose cards is deferred interest.

That means that consumers may be tempted to spend on a card offering 0% interest for 12 months, but if they don’t repay the balance in that time the interest that would have been due in that period will be added.

“Don't fall into a trap and apply for one of these cards impulsively at the checkout counter,” said Rossman, “It's fine to say 'no' or 'not right now' or 'I'm going to think about it.' The retailer may dangle 10% off today's purchase if you sign up, but that's not worth it if you're going to pay a 30% interest rate for years to come. Be absolutely sure that you can pay in full before interest hits."