The Real Cost of That Store Credit Card Offer? Try 30% Interest Rates

Interest rates on store credit cards have reached a record average of 30.45%, according to Bankrate.

CNBC reports that these high rates are showing up more often in bankruptcy filings, particularly among consumers carrying retail card debt.

With higher rates and fees, consumers carrying store card balances are increasingly unable to keep up, and some are filing for bankruptcy as a result, according to CNBC.

Store card rates remain painfully high

Retail credit cards usually charge more interest than traditional ones, in part because issuers consider these borrowers to be riskier. CNBC reports that banks raised rates last year when they expected a federal cap on late fees.

Although that cap never took effect, the higher rates remained.

Between 2023 and 2024, total consumer bankruptcy filings rose 5.8%, but cases involving retail card debt jumped 12%, according to data from Stretto.

Reviewing a store card’s APR before signing up may help avoid debt that becomes unaffordable.

The 20% discount that could cost you more

Many retailers promote store cards with upfront discounts, such as 20% off a first purchase. Bankrate notes that many of these cards now carry interest rates over 30%, which can turn a temporary savings into a long-term cost.

For instance, carrying a $500 balance at 30% APR and making only minimum payments could cost more than $150 in interest in the first year alone, and even more over time.

Comparing the size of the initial discount with the potential cost of carrying a balance may lead to better decisions at checkout.

How to escape high-interest store debt

To lower your interest burden and get out of store card debt faster, consider these expert-backed strategies:

• Tackle the highest-rate card first. According to CNBC, focusing extra payments on the card with the highest APR, while making minimum payments on others, can reduce total interest faster than spreading payments evenly.

• Consider a balance transfer. NerdWallet notes that traditional credit cards average around 22% APR. Transferring your store card balance to a lower-rate card, especially one with a 0% promotional offer, can reduce interest costs if you pay off the balance before the promotional period ends.

• Get help with a repayment plan. If you have more than $10,000 in unsecured debt, consider getting some professional help. National Debt Relief is a trusted source for free advice and assistance.

• Ask about hardship programs. Some issuers provide temporary relief, such as reduced interest or flexible payments, though these programs are rarely advertised. According to CNBC, contacting the card issuer directly may help you access support.

That discount could cost more than you think

Retail banks say store cards offer a way to manage spending and improve credit.

But CNBC reports that the rising number of bankruptcy filings tied to these cards suggests high interest rates undermine those potential benefits.

Many consumers may be better off using debit or traditional credit cards with lower rates. Before accepting a discount tied to opening a new account, ask yourself whether you’ll pay it off in full within a short time. If not, the interest could outweigh any benefit.