New study from LendingTree shows an increased interest in store credit cards, despite soaring APRs.
11/11/2022 9:30 A.M.
2.5 minute read
A new study from LendingTree reveals that more Americans than ever are considering applying for store credit cards in the upcoming holiday season.
These findings come after a dip last year in those interested in store credit cards, which was the lowest number in three years.
This is despite the fact that the Federal Reserve has increased the rates at which banks can borrow money from one another, increasing the cost of borrowing across the economy and resulting in rising annualized percentage rates (APRs), ACA International previously reported in an article on credit card interest rates.
A new study by Creditcards.com showed the average interest rate for retail credit cards has hit a record high of 26.72%, while general purpose credit cards now charge an average of 22.6%, according to a report from The Hill.
There are currently 24 retail credit cards on the market that charge 30% APR, including those from Burlington, Dick’s Sporting Goods and Wayfair. As of last week, the Fed was advising banks to charge each other 10 times that amount, according to the article.
Key findings from the LendingTree report include:
- Interest in store credit cards has rebounded sharply.35% of Americans say they’re at least somewhat likely to apply for a store credit card this holiday season. That’s up from 29% a year ago and the second-highest percentage in the five years LendingTree has been tracking.
- More than 1 in 3 consumers who’ve had a store credit card regret signing up.37% of Americans say they’ve regretted getting a store card, including 14% who say it’s happened to them several times.
- The average new store card APR is 26.60%, up from 24.27% a year ago.The LendingTree review of more than 100 store credit cards shows that the average new store card rate in 2022 is the highest since it began tracking in 2018. It’s also significantly higher than the rates for all new credit card offers, which is 22.21%.
- More store card rates are hitting a ceiling that issuers aren’t comfortable pushing past.Very few credit cards in America have APRs of 30% or higher. It’s long been thought that the credit card industry has set 30% as an unofficial ceiling for rates that most issuers won’t touch. LendingTree noted that is has seen proof of that, as the number of cards it reviewed with 29.99% interest rates rose from eight last year to 29 this year. Meanwhile, the number of store cards at 30% or higher went from zero to one.
“From a consumer perspective, 29.99% is an astronomical rate,” said Ted Rossman, an industry analyst with Creditcards.com. “If you charged $1,000 and only made minimum payments at 29.99%, you would be in debt for 51 months and would end up paying a total of $775 in interest. Consumers may want to be more thoughtful about their retail card applications—last year, we found 68% who had applied for a retail card had done so impulsively at least once.”
Read the full LendingTree report here.
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