Americans’ household debt is already near record highs, and if a glance at credit card interest rates is any indication, it’s about to get a lot worse. A new Bankrate reports finds the average annual interest rate on retail credit cards is just over 30%, which is actually down slightly from last year. That compares to about 20% for standard credit cards like Visa and MasterCard, which is still very high. Among the highest-rate retail cards are Academy Sports, Petco, Saks, and Victoria’s Secret. The lowest-rate cards include IKEA and Bass Pro Shops.
Financial experts say if you have those retail cards for the perks like discounts and cash back, you should try to avoid carrying a balance month to month. “If you’re paying 30 percent per year, in two-and-a-half years you could have bought two of whatever you purchased,” says Bill Dendy, certified financial planner. “So we’re essentially stealing from ourselves if we use credit in this way, especially with those high interest rates.”
Don’t expect the Fed to come to your rescue, either. Despite the Federal Reserve cutting interest rates late last year, the average card rate barely moved and even increased for several retail cards. And since it’s legal, you can expect banks and retailers to continue charging ridiculous rates as long as we’re willing to pay them. That’s why Dendy warns not to get sucked into the credit card debt spiral. “For some people with large balances, they get into a situation where they are making the minimum payment, then they miss a payment and they get a missed payment fee or a late fee, and they end up paying interest rates that are extraordinarily high on top of that,” he says.
“We used to joke that even the mob or the pawn shop charge less interest than this.”
