The average credit card interest rate for retail stores has hit a record high of 26.72 percent while general purpose credit cards now charge an average of 22.6 percent, according to a study released Monday by industry group Creditcards.com.
The rise in annualized percentage rates (APRs) comes as the Federal Reserve is raising the rates at which banks can borrow money from each other, making financing more expensive throughout the economy.
Twenty-four credit cards on the market now charge 30 percent, including cards from retailers Dick’s Sporting Goods, Burlington and Wayfair. That’s ten times what the Fed was telling banks to charge each other, as of last week.
The study put the highest retail credit card APR at 30.74 percent, noting the Speedy Rewards Mastercard, the Kroger Rewards World Elite Mastercard and credit cards offered by nine of Kroger’s affiliated brands.
“From a consumer perspective, 29.99 percent is an astronomical rate,” Ted Rossman, an industry analyst with Creditcards.com, said in a statement. “If you charged $1,000 and only made minimum payments at 29.99 percent, you would be in debt for 51 months and would end up paying a total of $775 in interest.
“Consumers may want to be more thoughtful about their retail card applications — last year, we found 68 percent who had applied for a retail card had done so impulsively at least once,” he said.
The effect of higher interest rates from the Fed is being felt in all kinds of different debt financing mechanisms, from the federal budget deficit to the 30-year fixed-rate mortgage.
Forty-year high inflation now standing at 8.2 percent for consumers is affecting both creditors and debtors and altering relations between them to varying degrees, depending upon the kind of debt.
“There’s a good chance you’ll be offered a retail credit card this holiday season. Don’t get pressured into making a bad decision at the checkout counter,” Rossman said.
“For starters, any rewards would only be worthwhile if you can pay your bills in full and avoid interest,” he added.