From CNBC: 2024-11-22 07:05:03

Dozens of major U.S. retailers raised interest rates on store-branded credit cards to record highs before the Federal Reserve began cutting rates, aiming to boost profits amid slow sales. Big Lots, Gap, Petco, and others increased APRs, with some hitting 35.99%. Retailers cited industry standards and economic conditions for the hikes.

Retailers and their bank partners raised APRs preemptively to offset profit drops from expected Federal Reserve rate cuts. On average, store card rates rose by 1.52 percentage points from 2023 to 2024, compared to traditional credit cards. Despite consumer debt reaching new highs, retailers continue to hike rates to maximize profits.

Nordstrom, Big Lots, and other retailers raised store card rates before the Fed’s rate cut in September. Companies vaguely attributed the hikes to economic conditions and industry standards. Consumer advocates warn against signing up for high-interest store cards, emphasizing the financial risks of carrying a balance.

Retailers like Macy’s profit significantly from store card programs, with high interest rates contributing to earnings. Despite the Fed’s rate cut, many store card APRs remain at record highs. New account openings for store cards have declined, leading retailers to rely on existing customers for profits.

Consumers with strong credit scores are also seeing higher APRs on store cards, regardless of their creditworthiness. Retailers like Macy’s have implemented rate hikes even for customers with good payment histories. High store card interest rates are pushing consumers to reconsider their shopping habits and financial decisions.



Read more at CNBC: Retailers like Macy’s, Gap and TJX jack up store card APR