Retailer credit cards carry significantly higher interest rates than traditional accounts
However, a new study found that these accounts typically have far higher interest rates than those for traditional cards. U.S. Representative Anthony Weiner's office conducted a survey of 35 major retailers in New York City to determine the APR on credit card debt for store-issued accounts, and found that the average rate is 23.83 percent, about 22 percent higher than those granted by banks.
This rate is up slightly from the one observed in 2008, the report said. Two years ago, the average APR on these cards was 21.71 percent. The current rate is more than nine percentage points higher than the national average for bank-issued cards, which is currently 14.78 percent.
"As this survey demonstrates, store charge cards can be very expensive if you don’t pay the bill in full every month," Chuck Bell, programs director for Consumers Union, publisher of Consumer Reports, told Weiner's website. "Consumers need to be aware that store cards usually carry sharply higher interest rates than ordinary credit cards. Don’t succumb to high-pressure holiday pitches to open up a new store account without carefully checking the interest rate, penalty and late fees, and other fine print."
Radio Shack's account carried the highest rate on credit card debt, with an APR of 28.99 percent, the study found. Not far behind were both Staples and Best Buy, with rates of 27.99 percent. Home Depot and Sears both had cards carrying interest rates of more than 25 percent.
The study also looked at retailers' introductory deals, and found many offered no interest for several months as a way to draw in more customers. However, the fine print often contained language that saw retroactive interest rates applied to all credit card debt that hasn't been paid off within the allotted time period.
The federal government has already cracked down on many lender practices with the Credit Card Accountability, Responsibility and Disclosure Act, and several more additions to those regulations are currently being discussed.
