The Federal Reserve hasn’t raised interest rates since the summer of 2023. But America’s retailers apparently didn’t get the memo. 

The average interest rate on store credit cards reached 30.45% this year, an all-time high, according to the personal finance site Bankrate.  

Another industry survey, from WalletHub, found even higher interest rates on retail cards: 33.07%, on average, as of November.  

Those are high rates, even compared with other credit cards. Across the industry, the average credit card carries an interest rate of about 21%, Bankrate reports. 

During the pandemic years, dozens of store credit cards blew past a symbolic 30% interest-rate barrier that the industry had previously dared not pass.  

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“Thirty percent used to represent an unofficial ceiling for retail credit card rates, but now most retail cards have crossed that threshold,” said Ted Rossman, a senior industry analyst for Bankrate. 

Retail card rates rose dramatically during the pandemic years, Bankrate found, from an average of 24.35% in 2021 to 26.72% in 2022 and 28.93% in 2023.  

'Padding the profit margin'

At least 50 large retailers raised interest rates on their store cards in the months before the Federal Reserve began cutting rates, according to a CNBC analysis of Bankrate data. The Fed cut its benchmark rate by half a percentage point in September.  

“We definitely saw big increases over the past year, which was notable, because the Fed didn’t make any big changes between our 2023 survey and our 2024 survey,” Rossman said. Bankrate ran its most recent survey in early September, shortly before the Fed action. 

“Really, what that shows is, issuers were padding the profit margin,” Rossman said.  

Card companies are charging record-high “margins,” interest the card issuer charges above the prime lending rate.  

That’s why card rates are higher now than they have ever been, analysts said, including times when other interest rates were higher than they are today. 

Credit card margins average 14.9%, as of August, WalletHub reports. In other words, the average cardholder pays roughly 15% in annual interest on top of the prime rate. 

“Across the entire credit card industry, the margin has been going up and up,” said Odysseas Papadimitriou, CEO of WalletHub.   

Retailers typically offer credit cards with bank partners. Many factors influence the interest rates on those cards, said Sarah Grano, spokesperson for the American Bankers Association, including the Fed, broad economic and consumer trends, and regulatory concerns.

“The financial services marketplace is highly competitive, and consumers can choose from a wide range of credit products that best meet their needs, including traditional and store-branded cards," Grano said.

Several big-box store cards charge 35.99% interest

Credit card rates hit historic highs alongside an aggressive campaign of rate hikes by the Fed in 2022 and 2023. 

The Fed stopped raising interest rates in July 2023, but retailers kept on going. The average rate on a store card rose by more than a full percentage point between 2023 and 2024, Bankrate found.  

Bankrate’s latest survey found several big-box retailers charging 35.99% in annual interest, including Academy Sports + Outdoors, Big Lots, Burlington, Michaels and Petco. Several others topped out at 34.99%, including Banana Republic, JCPenney and Walgreens.   

WalletHub found an even bigger jump in average rates on store cards, from 29.89% in 2023 to 33.07% in 2024. 

Credit card analysts see those rates as red flags in the coming holiday season. Inflation-weary shoppers may be tempted to put big purchases on a store card, potentially unaware of the interest they will accrue if they fail to pay off the balance before the new year. 

“Really, the consumer advice is, be awfully careful,” Rossman said. “Because it’s not a good deal if you’re carrying a balance.” 

Card rates have risen dramatically in the last few years. The average rate across all commercial bank cards surged from 14.56% in February 2022 to 21.76% in August 2024, according to federal data. 

Why are card rates higher than other interest rates?

Credit cards tend to come with higher rates than car loans or mortgages. A credit card is not generally “secured” by a piece of property that the lender can claim if the borrower stops making payments.  

Card companies take a risk by extending credit to consumers with a wide range of credit scores, some of whom will not repay the debt. 

Store cards tend to charge more interest than other cards, retail analysts say, partly because retail cardholders tend to earn lower income and to have weaker credit. 

Retailers often pitch cards to consumers at the checkout counter, a high-pressure environment. It is not the ideal time for potential cardholders to read the fine print. 

Store cards face competitive pressure from buy now, pay later, an alternate financing model that lets consumers buy something and pay for it in several interest-free installments.  

Retail cards are more commonly pitched in stores, Rossman said, while buy now, pay later flourishes online. Lately, he said, the retail card business has been flagging. 

“This is a changing business,” Rossman said. “Fewer people are shopping in-store.” 

Beware of deferred interest

It might seem counterintuitive that millions of consumers would sign up for credit cards with 35% interest rates.  

Retailers make the cards attractive, analysts say, with promotional offers. A new cardholder might reap 20% off a large purchase.  

Another big holiday promotion is “deferred interest.” The shopper generally puts a large purchase on a store card and then has six or 12 months to pay off the balance without owing any of the interest. 

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But the interest accumulates, all the same. And if the buyer misses the payoff deadline, it all comes due. 

“They go back and they charge you this outrageous 30% rate, as if you never had zero percent interest on the card,” Papadimitriou said. “And it’s legal.” 

Many shoppers find those terms confusing and misleading. In a 2023 survey, WalletHub found that 62% of Americans believe deferred interest should be illegal. 

But deferred interest remains a popular promotional option for many consumers, said Grano, the banking industry spokesperson. In a previous USA TODAY report, Grano said customers "benefit from having the opportunity to pay over time, and can avoid paying interest. It also allows them to avoid turning to even more expensive forms of credit.”