If you’ve ever stood in the checkout line at a brick-and-mortar retailer and been offered a discount on your purchase by applying for a credit card, the cashier was trying to sell you on a retail card.
One version of retail credit cards are store credit cards, which are only usable at the store or brand affiliated with the card. These are different from co-branded cards, which are affiliated with a brand as well as a card network such as Visa or Mastercard, and can be used for purchases anywhere.
Both types of retail cards let you earn rewards and discounts with certain brands. But at what price? A new Bankrate study shows that retail cards come with sky-high interest rates compared to other credit cards.
The average retail credit card interest rate is now at a record high of 30.45 percent. It’s also far higher than the current average credit card interest rate of about 21 percent.
Thirty percent used to represent an unofficial ceiling for retail credit card rates, but now most retail cards have crossed that threshold.
— Ted Rossman, Bankrate Senior Analyst
Learn more about why retail card interest rates are so high and how to avoid expensive interest fees as a cardholder.
Key insights on retail credit card interest rates in 2024
- The average interest rate for retail cards is at an all-time high. At 30.45%, that means carrying a balance is more expensive than ever.
- Certain retailers lead the way in high rates, while others offer rates comparable to or lower than regular card rates. Rates can run as high as 35.99% and as low as 10%.
- Retail cards can be easier to qualify for, so retailers protect against anticipated cardholder defaults by charging high rates. It’s also a major profit opportunity for retailers.
Retail cards are on a spree — of rising interest rates
While it’s typical for credit card interest rates to rise and fall based on the Federal Reserve’s prime rate and cardholders’ credit scores, retail credit card rates are unusually high this year.
The average retail credit card currently charges a record-high 30.45 percent APR. That’s up from:
- 28.93 percent in 2023
- 26.72 percent in 2022
- 24.35 percent in 2021
For comparison, the average credit card interest rate has lingered in the 20 percent to just under 21 percent range since March 2023.
Among store-only credit cards — also known as closed-loop cards — the average is 31.80 percent. Among co-branded cards — also known as open-loop cards — the average is 29.09 percent.
“[Card issuers have] built models and audiences that only work if they get a ton of revolve on the card and they charge really high interest rates,” explains Michael Spelfogel, founder and president of Cardless.
In other words, when retail cardholders carry a balance, the issuer wins.
“[Store credit cards] are a vestige of a former time when people would have an affinity to one mega store or brick-and-mortar store.
— Michael Spelfogel
Founder and president of Cardless
Spelfogel, who has over 300 credit cards in his wallet, encourages people these days to choose a card that meets their needs. He notes that store cards may not always be a good fit because of their high interest rates and brand limitations.
Which retail cards charge the highest and lowest rates?
When it comes to rising interest rates, certain retailers in Bankrate’s study pull up the average more than others. Here are the retailers offering cards with the highest APRs:
- Academy Sports + Outdoors Credit Card: 35.99%
- Big Lots Credit Card: 35.99%
- Burlington Credit Card: 35.99%
- Good Sam Rewards Credit Card: 35.99%
- Michaels Credit Card: 35.99%
- Petco Pay Credit Card: 35.99%
- Banter by Piercing Pagoda: 35.99%
- Athleta Rewards Mastercard: 34.99%
- Banana Republic Rewards Mastercard: 34.99%
- HSN Credit Card: 34.99%
- JCPenney Credit Card: 34.99%
- JCPenney Mastercard: 34.99%
- myWalgreens Credit Card: 34.99%
- Navyist Rewards Mastercard (Old Navy): 34.99%
- QVC QCard: 34.99%
- Real Rewards Credit Card (American Eagle and Aerie): 34.99%
- Real Rewards Visa (American Eagle and Aerie): 34.99%
- Tire Rack Credit Card: 34.99%
- TJX Rewards Credit Card: 34.99%
- TJX Rewards Platinum Mastercard: 34.99%
In contrast, other retailers still offer interest rates comparable to regular credit cards. These brands offer the lowest APRs:
- Amazon Secured Card: 10.00%
- Military Star Card: 15.49%
- Costco Anywhere Visa by Citi: 20.49%
- Bass Pro Shops CLUB Card: 21.12%
- IKEA Projekt Credit Card: 21.99%
- IKEA Visa: 21.99%
Why are retail card interest rates so high?
Federal Reserve rate hikes have contributed to rising retail card rates, but retail rates are still considerably higher than typical card rates. While the Fed hasn’t implemented any interest rate changes since July 2023, the average retail card rate increased by more than a full percentage point over the past year.
There are some other factors to consider.
Lower credit requirements
Retail cards often aren’t as selective about applicants’ credit scores, making the cards easier to qualify for. But a poor score or limited credit history means more risk for card issuers. Bad credit scores tend to feature higher interest rates, so issuers can protect themselves.
Therefore, if you’re still building your credit, a credit card for bad credit — like a secured card — might allow you to do more than a retail card.
Profit for retailers
High retail interest rates aren’t just for managing risk with less creditworthy cardholders, though.
In fact, retail credit cards are big money makers. According to a Citi analyst, 49 percent of Macy’s operating profits came from its credit card in 2022.
Rossman points out that retailers typically get a “finder’s fee” from card issuers for bringing in new customers. Additionally, retailers can benefit from lower interchange fees when the card is used at their stores, and some retailers even get a share of the interest and fee revenue from their retail cards.
Competition from buy now, pay later services
People now have another way to pay for big purchases from a retailer over time — buy now, pay later (BNPL) services. According to Bankrate’s 2024 Buy Now, Pay Later Survey, 39 percent of U.S. adults have used at least one BNPL service at checkout.
These services are typically interest free and may be easier to qualify for than traditional credit products. While BNPL services can lead to overspending, they also offer buyers a way to spend money with more flexibility.
According to Rossman, the BNPL industry has seriously cut into retail cards’ market share. A July 2024 Equifax report shows that private label card — aka store-only card — account openings have fallen in seven of the past eight years. Meanwhile, general purpose credit card account openings hit a record high last year.
How to avoid high interest fees with a retail card
If you have a store card or co-branded card in your wallet, it’s possible to use it responsibly without falling victim to a lofty interest rate.
1. Don’t carry a balance
The number one rule for avoiding interest charges on a credit card is to pay off your balance on time and in full, if possible. That means you’ll want to spend within your means, not more than you can afford. You can even set up automatic payments so you never miss a due date.
You can also dodge interest on a balance by not having a retail card at all.
“Don’t fall into a trap and apply for one of these impulsively at the checkout counter,” Rossman says. “It’s fine to say ‘no’ or ‘not right now’ or ‘I’m going to think about it.’
“The retailer may dangle 10 percent off today’s purchase if you sign up, but that’s not worth it if you’re going to pay a 30 percent interest rate for years to come.”
2. Choose the card that works for you
Before applying for a retail card, consider what you’re looking for with the card. Are you loyal to the brand and hoping for brand-specific rewards? Or would you benefit more from general cash back or travel rewards? You can still earn 1 percent to 8 percent cash back or 1X to 10X miles or points on purchases you make with a typical rewards card.
Still, Rossman says there are certain circumstances when a retail card might work for you.
“Some stores, such as Amazon, Best Buy and Target offer 5 percent cash back every time you use their card to buy something from them. That’s probably better than you would get with any other card,” Rossman explains. “For a loyal shopper who pays in full and avoids interest, that’s a compelling value proposition.”
3. Watch out for deferred interest
Deferred interest offers are often marketed like 0 percent promotional APR offers, but there’s a key difference — with a deferred interest offer, if you fail to pay the entire balance by the time the promotion ends, you’ll be charged retroactively for all of the interest that would have accumulated back to the start of the term.
Deferred interest promotions are common with retail cards, and can end up costing you a lot more than a typical credit card promo APR offer that won’t charge retroactive interest.
If you do accept a deferred interest offer on a retail card, do your best to pay off the full balance before the offer period ends.
4. Keep an eye on the potential late fee cap
Rossman explains that the credit card late fee cap proposed by the Consumer Financial Protection Bureau (CFPB) could further impact card rates, especially for retail cards. That’s because retail card issuers rely more on late fees than typical card issuers.
The late fee cap would drop late fees from a current average of $32 down to $8. But history shows that when one fee gets cut, another fee pops up. Card issuers are motivated to earn profit in other ways.
“We’re already seeing some defensive moves such as raising rates and other fees, even though the late fee cap was put on hold by a federal judge,” says Rossman.
At the risk of sounding like a broken record, remember the best way to avoid late fees and interest charges is to always pay on time and in full.
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Bankrate surveyed 108 retail credit cards on Sept. 3, 2024, using publicly available terms-and-conditions disclosures. We included each of the 100 largest retailers, as defined by the National Retail Federation based on 2023 sales, that offer credit card programs. The sample included 54 co-branded cards and 54 store-only cards. When a card offered an APR range, we included the midpoint of the range in the overall averages.
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