If you’re planning to do your holiday shopping with a retailer-sponsored credit card, you could be looking at hefty fees if you carry a balance.
Retail credit cards carried an average annual percentage interest rate (April) of 26.72% in November, up from 24.35% a year ago, according to a survey by Creditcards.com, an information service.
The latest figure represents a record going back to 2008, when Creditcards.com began tracking the data. Of course, general interest rates were higher before the financial crisis in 2008. So RCBs were probably higher then too.
Multipurpose credit cards had an average APR of 22.66% in November. The average store credit card APR was 28.22%, up from 25.77% last year. The average retail co-branded card APR was 25.01%, up from 22.12%.
A retail card is secured by a store, but can also be used elsewhere. One store card can only be used at the issuing store. A co-branded card is sponsored by a bank or credit card company in addition to the retailer.
APRS highest, lowest
The highest retail credit card APR of 30.74% is charged by the Speedy Rewards Mastercard, the Kroger Rewards World Elite Mastercard and credit cards offered by nine of Kroger’s affiliated brands.
There are 24 retail credit cards that charge 29.99% to all cardholders with balances, almost all of which are store-only cards, the report said.
Those retailers include Big Lots, Dick’s Sporting Goods, Country Discount, Jared, Kay Jewelers, TJX, Wayfair and Zales.
“From a consumer perspective, 29.99% is an astronomical rate,” said Ted Rossman, senior industry analyst at CreditCards.com.
“If you borrowed $1,000 and only made down payments at 29.99%, you would be in debt for 51 months and pay a total of $775 in interest.”
The lowest retail credit card APRs came from the Amazon Secured Card (10%), the Military Star Card (13.99%) and the Costco Anywhere Visa with Citi (18.24%). That last one doesn’t seem like much of a bargain.
APR ranges, Be careful
Some cards have a range of APRs that depend on the creditworthiness of the cardholder. The Apple card has a range of 13.99% to 24.99%, the Capital One Walmart Rewards Mastercard has a range of 17.99% to 26.99% and the Home Depot Consumer Credit Card has a range of 17.99% to 26.99%.
“There’s a good chance you’ll be offered a retail credit card this holiday season,” Rossman added. “Don’t force yourself to make a bad decision at the checkout counter.”
First, “no reward would be worthwhile unless you can pay your bills in full and avoid interest,” he said. “You also have to shop the store often for the rewards to be worthwhile.
“In many cases, it would be better to get a multi-purpose credit card instead. These tend to offer more flexibility, more generous rewards, and better interest rate promotions.”