SAN DIEGO — Interest rates on retail credit cards are on the rise, and the numbers may surprise you.
Macy’s just sent letters to its card users announcing the interest rate on their Macy's card is jumping to 34.49%. Industry experts told CBS 8 the increase is part of a nationwide trend.
“I mean, i follow this so closely that I'm not shocked, but on the face of it, yeah, that's a really high interest rate," said Ted Rossman, a senior industry analyst at Bankrate.
Rossman says retail stores already have the highest APRs, and those rates have been climbing steadily mirroring what the Feds are doing.
"So, credit card rates have been pushed to record highs in recent months. The national average has jumped about four and a half points since the Fed started raising rates, some cards have jumped even more," said Rossman.
Rossman shared examples of other retailers with APR's over 30%, including Petco and Exxon Mobil.
The average of all credit cards is just over 20%.
Aside from Federal Reserve rate hikes, Rossman says retailers are also raising rates to coincide with the Consumer Financial Protection Bureau's push to lower late fees.
"Right now, the average credit card late fee is $32 and the CFPB is trying to bring it down to eight dollars. They were actually supposed to do it in May, and then a federal judge struck that down temporarily, and it's still kind of winding its way through the courts. Store credit cards rely on late fees more than your general purpose Amex or Capital One card, so a lot of store card issuers have begun pulling other levers to compensate for what may be a drop in late fee revenue," said Rossman.
To deal with the new rate hikes, Rossman suggests paying your credit cards in full.
If that's not possible, move your debt over to another card.
"Like, let's say you have a $1,000 balance on your Macy's card. You're being charged 34% - move that and maybe some other credit card debt that you may have on other cards, move that over to a new card with a zero percent promotional rate, something like the Wells Fargo Reflect or City Simplicity, they won't charge interest for up to 21 months," said Rossman
Can you negotiate?
Rossman says 80% of the time, customers in good standing can call and get their APR reduced, but it may not make much of a dent.
To give you an idea of how slowly paying off some bills with high interest rates can take, CBS 8 asked Rossman to calculate how long it would take to pay off a $1,000 Macy's bill under the new 34.49% rate by only making minimum payments,
The answer is as shocking as the APR itself.
"That would keep somebody in debt for 58 months. So almost five years. The total interest expense would be $1,047. So, in other words, you've more than doubled your initial outlay,” said Rossman.
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