When the Federal Reserve dropped interest rates to 0% earlier this year, the rates on many consumer loans followed suit. Some store credit cards have proven to be the exception.
A new report from CreditCards.com looked at the interest rates banks are charging for store cards — credit cards that are issued, often at checkout, by retailers. On average, retail cards now carry an annual percentage rate of 24.43%, down from 26% a year ago.
But some retailers have kept their rates high. The CreditCards.com report analyzed 84 retail cards. Of those, 15 credit cards have the same rate as a year ago, while two have upped the APR they charge.
What’s more, multiple retailers offer store cards that come with an industry-high interest rate of 29.99%, unchanged from a year ago:
• Big Lots
BIG,
• Discount Tire
• Jared The Galleria of Jewelry
• Kay Jewelers
• Piercing Pagoda
• Sterling Family of Jewelers
SIG,
• Zales
(None of the stores responded immediately to a request for comment.)
Overall, the average interest rate charged for store cards is much higher than what consumers pay for other credit cards. The national average APR across all credit cards, according to CreditCards.com, was 16% as of Sept. 30. Rewards cards, business credit cards and cash back cards all tend to carry even lower rates than that on average.
Many Americans open store cards without putting much advance thought or planning. The report found that 43% of U.S. adults had impulsively applied for one of these credit cards at checkout. Stores often offer exclusive discounts to card holders, including seemingly lucrative sign-up bonuses, as customers are checking out with their purchases.
Yet research has shown that as many as half of American have regretted their choice to open a retail card. Because the cards are approved with little to no underwriting, most come with a high interest rate. So if a shopper doesn’t pay their balance in full each payment period, they can quickly see whatever discount they got on their purchases frittered away as the interest owed grows quickly.
“When you’re stressed and rushed, that’s when you’re more likely to make a mistake,” Ted Rossman, an analyst at CreditCards.com, said in the report.
“These cards can be good if you’re loyal to the store and if they offer competitive rewards and you pay in full to avoid interest,” he said. “But if you’re going to pay a high interest rate or hurt your credit score in another way, it’s better to steer clear.”
Source : MTV
