PHILADELPHIA (KYW Newsradio) — The holidays are around the corner, and that means retailers will be offering credit card promotions. However, economists say that annual percentage rates have hit an all-time high.
Retail credit cards traditionally tend to carry a higher interest rate than companies that partner with major carriers such as VISA. But a recent Bankrate study finds interest rates for a retail card averages near 30.5 percent.
Those cards are often less selective when approving applicants and some even offer rewards, but Senior Industry Analyst with Bankrate Ted Rossman says it's only a reward if you pay off your statements in full.
“You definitely don't want to fall into the trap of paying interest, or sometimes you're offered those at the point of sale, and it's kind of pressured and it's like do you want to save 10 percent off of today's purchase, not if you're paying 30 percent," he said.
Rossman says retail card signups have seen a significant decline in recent years — and high interest rates coupled with the buy-now-pay-later approach are most likely contributing to that.
But companies like Affirm, Afterpay, and Klarna have shaken up the landscape of retail shopping.
"Everybody sees that pitch about 'do you want to split today's purchase into installments, maybe it’s four interest-free payments over 6 weeks,” Rossman said. “That has taken over, especially online for a lot of store cards."
Rossman says it is going to take a while for credit card rates to come down meaningfully once the Federal Reserve cuts interest rates. But he says he expects retail card APRs to remain high.