As the holiday season draws near and families plan their festive spending, there's concerning news about retail credit cards.
With interest rates climbing steadily, the average annual percentage rate (APR) for retail credit cards has soared to a new record high of 28.93% this year, according to Bankrate.
This sharp increase, up from 26.72% in 2022 and 24.35% in 2021, could significantly impact our holiday budgets.
"Store credit cards are definitely not worth it if you carry a balance," says Ted Rossman, senior industry analyst at Bankrate.
"The only time I think these really work for you is if you can pay in full, avoid interest, and you're loyal to the store. So you're getting a discount every time you shop. Or you're getting a big discount off an initial purchase that you can pay off right away. I definitely wouldn't advise using these as a financing tool given the high interest rates."
For example, Rossman says, if you put a $1,000 purchase on a retail card at the average interest rate (28.93%) and only make minimum payments, it'll take you 50 months to pay off, and you'll end up forking over $715 in interest.
According to the report, the highest retail credit card APR is 33.24% on the Academy Sports + Outdoors Credit Card, the Burlington Credit Card, the Good Sam Rewards Credit Card and the Michaels Credit Card.
Additionally, Rossman says beware of deferred interest.
“Retailers dangle sign-up bonuses to incentivize you to get one of their credit cards. For example, they might offer 10% off your first purchase," Rossman says. "That’s worth it if you’re making a large purchase that you can pay off before interest hits. But it’s probably not worth it if you’re going to carry a balance or if it’s a small purchase or if you’re not planning to shop at the store much in the future.”
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