November 7th 2023.
With the holiday season approaching, shoppers must be aware of the current trends in credit cards. According to Bankrate, the average APR for retail credit cards has skyrocketed to 28.93%. This is a significant increase from the 26.72% rate it was in 2021.
The news outlet also warns about the dangers of using retail cards due to the high interest rates. The average APR for traditional credit cards is 21.19%, which is significantly lower than that of retail cards. Bankrate's senior industry analyst, Ted Rossman, shared that 30% was the typical ceiling for retail credit card APRs. However, due to the Federal Reserve's interest rate hikes, this threshold has been shattered.
Rossman also explained how many retail credit cards are now in the subprime territory, even for those with excellent credit reports. He stated that the interest rates are usually reserved for those with deep subprime credit, but now anyone carrying a balance may be charged the same rate.
However, not all store-issued cards have a high APR. For example, Amazon's Secured Card has an APR of 10%, and Target and Best Buy offer 5% cash back on purchases. But, for cash-strapped shoppers, the high interest rates may outweigh the benefits.
As the holiday season approaches, shoppers must consider the factors that could lead to a costly Christmas if not informed. The high interest rates on retail cards can be a burden if shoppers are unable to pay off their balance in time. It is essential for shoppers to be aware of the current trends to ensure they make the best financial decisions for themselves.
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