If you’re planning to do your holiday shopping with a merchant-approved credit card, you could be looking at a hefty fee if you’re paying.
Retail credit cards carried an average annual percentage rate (APR) of 26.72% in November, up from 24.35% a year ago, according to research from Creditcards.com, an information service.
The most recent figures represent a record going back to 2008, when Creditcards.com began analyzing the data. In fact, interest rates were generally higher before the financial crisis of 2008. Therefore, the APR may be higher than then.
General purpose credit cards had an average APR of 22.66% in November. The average store-only credit card has an APR of 28.22%, up from 25.77% last year. The average retail card APR rose to 25.01%, up from 22.12%.
The store accepts business cards, but can be used elsewhere. The card can only be used in shops and stores that offer it. The bank or credit card company approves the co-branded card in addition to the merchant.
The higher, the lower the APRS
The highest business credit card APR of 30.74% is charged by the Speedy Rewards Mastercard, Kroger Rewards World Elite Mastercard and credit cards offered by nine Kroger-owned brands.
There are 24 business credit cards that charge 29.99% to all cardholders and balances, and almost all of them are store-only cards, the report said.
Those retailers include Big Lots, Dick’s Sporting Goods, Discount Tire, Jared’s, Kay Jewelers, TJX, Wayfair and Zales.
“From a consumer perspective, 29.99% is an astronomical number,” said Ted Rossman, senior industry analyst at CreditCards.com.
“If you borrow $1,000 and make the minimum payment at 29.99%, you’ll pay for 51 months and end up paying a total of $775 in interest.”
The lowest business credit cards are Amazon Secured Card (10%), Military Star Card (13.99%) and Costco Anywhere Visa from Citi (18.24%). That last one doesn’t seem like a lot of money.
High APR, be careful
Some cards have different APRs based on the cardholder’s credit. The Apple Card has a margin of 13.99% to 24.99%, the Capital One Walmart Rewards Mastercard has a margin of 17.99% to 26.99% and the Depot Consumer Credit Card has a margin 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 be bullied into making bad decisions in the banking industry.”
First, “any salary will be worth it if you can pay off your debt in full and avoid interest,” he said. “You need to shop at the store often for the rewards to be worth it.
“In most cases, it’s better to get a general purpose credit card instead. These usually offer flexibility, generous rewards and better interest rates.”