As the holiday season approaches, you’re likely to run into promotions for retail credit cards — and merchants dangling incentives for using them. Be aware, however, that the average retail credit card now charges a record-high interest rate of 28.93 percent, according to new Bankrate data, up from 26.72 percent in 2022 and 24.35 percent in 2021.

In comparison, the average credit card interest rate is 21.19 percent, with consumers who carry a balance paying an average rate of 22.77 percent. This distinction alone makes it clear why turning to retail credit cards over traditional rewards cards or cash back cards to fund your holiday shopping isn’t the best idea.

“We used to see 30% as the high end for retail credit card APRs,” says Ted Rossman, Bankrate’s senior industry analyst. “In fact, 29.99% was an artificial barrier that few dared to cross — for psychological reasons, mostly. But the market has blown past that threshold given the Fed’s aggressive series of interest rate hikes over the past year and a half.”

Key takeaways

  • The average retail credit card now charges a record-high interest rate of 28.93 percent, up from 26.72 percent in 2022 and 24.35 percent in 2021.
  • Interest rates on several retail credit cards have crossed into subprime territory, including four store cards with an exceedingly high 33.24 percent APR.
  • The use of deferred interest promotions associated with retail credit cards can also pose a threat to consumers, who may incur unexpected interest if their balances aren't paid in full before the promotional periods end.
  • While some retail cards offer lower-than-average rates, these often come with restrictions on where and how they can be used.
  • Retail credit cards often offer special promotions that can take the sting out of holiday spending, but consumers should take care to pay their balances in full before accruing interest to get the most value from these cards.

Retail card interest rates continue upward march

Store credit cards — those that, as the name indicates, can only be used at the issuing stores and their related outlets — are at the front of the pack of high interest rate-carrying retail cards. In fact, the average interest rate charged by store-only retail credit cards is 30.24 percent.

Four store-only retail credit cards — the Academy Sports + Outdoors Credit Card, Burlington Credit Card, Good Sam Rewards Credit Card and Michaels Credit Card — all charge an exceedingly high APR of 33.24 percent. Not only that, but be aware that none of the above cards offers an APR range. That means if you carry a balance, you’ll incur the same steep interest rate, irrespective of whether your credit is excellent or you just squeaked through the approval process for the card.

Two co-branded retail credit cards — the Coast to Coast Visa/Visa Signature and the Good Sam Rewards Visa/Visa Signature — offer a more graded approach, charging some borrowers the 33.24 percent rate while favoring more creditworthy customers with a lower rate of 22.24 percent.

Further, 16 retail credit cards — 13 store-only cards and 3 co-branded offerings — charge all balance-carrying customers a steep 32.24 percent interest rate. Some of these cards include the Banter by Piercing Pagoda card, the HSN Credit Card, Ross Mastercard and the Wayfair Mastercard.

Two additional credit cards — the co-branded myWalgreens Mastercard and the Ultamate Rewards Mastercard — also follow a graded approach, with rates starting at 23.24 percent and soaring as high as 32.24 percent.

Eleven cards had a maximum APR of 30.74 percent last year, including the Speedy Rewards Mastercard, the Kroger Rewards World Elite MastercardⓇ* and nine cards offered by brands affiliated with Kroger. However, their more creditworthy customers, who’d find it easier to get credit card approvals, could qualify for lower rates.

Retail credit card rates now in subprime territory

Retail credit card APR rate hikes over the past several years now put them in subprime territory.

“Many retail credit cards now charge all of their balance-carrying customers rates in line with what we used to think of as figures reserved solely for a deep subprime audience,” says Rossman.

Historical averages for retail credit card APRs

Year Average APR
Source: Bankrate survey data
2023 28.93%
2022 26.72%
2021 24.35%
2020 24.43%
2019 26.01%
2018 25.64%
2017 24.99%
2016 23.84%
2015 23.43%
2014 23.23%
2013 No survey
2012 No survey
2011 No survey
2010 21.22%
2009 20.08%
2008 18.14%

Retail credit cards with lower APRs

On the other end of the retail credit card rate spectrum, the Amazon Secured Card* offers the lowest retail credit card APR at 10 percent. It’s a special situation though, because cardholders are required to put down a deposit that equals their credit line for the privilege of using this store card. That upfront deposit effectively covers the risk exposure of the credit card issuer, thereby meriting the card’s lower rate.

Another special case with a lower APR is the Military Star Card, which at 15.49 percent comes with the second-lowest APR in our survey. This store credit limits your shopping options to military exchanges, commissaries and their websites. And while the Bass Pro Shops CLUB Card charges a 9.99 percent APR at Bass Pro Shops and Cabela’s, you could be charged up to 31.99 percent if you use this card elsewhere.

Lowest average APRs for retail cards in 2023

Card Average APR
Source: Bankrate survey
Amazon Secured Card 10%
Military Star Card 15.49%
Costco Anywhere VisaⓇ by Citi* 20.49%
Bass Pro Shops CLUB Card 20.99%
IKEA Projekt Credit Card 21.99%
IKEA Visa 21.99%
Home Depot Consumer Credit Card 22.49%
Amazon Prime Visa 23.49%
Capital One Walmart RewardsⓇ MastercardⓇ* 23.87%
Apple Card* 24.37%
Casey’s Visa Signature Card 24.49%

“If you ever carry a balance, a retail credit card probably isn’t the best choice for you, because these cards tend to charge very high interest rates,” says Rossman. “If you’re able to pay in full and avoid interest, these cards might make sense if you’re loyal to the store. Some retail cards — including the likes of Amazon, Target and Best Buy — give 5 percent cash back when you buy something from them using their card. That’s probably better than you would get from a general-purpose credit card.”

Be wary of retail credit cards

Beyond the potential for higher interest rates, another major drawback of these retail credit cards is that many of them come with deferred interest promotions.

This means if you haven’t paid off your entire balance by the end of the promotional zero-interest period, you may be charged interest on your purchases retroactively, going back to the time of your purchase. As a result, you could incur interest charges based on your average daily balance dating back to the beginning of the promotion with retroactive effect, even if you’ve made the minimum payments required during the deferred interest promotional period.

This differs from most banks’ 0-percent interest promotional APR offers, as traditional general-purpose credit card issuers typically don’t charge interest retroactively on these promotions. On these offers, you pay interest only on any unpaid balance you carry going forward after an introductory period ends — not on your original purchase amount.

“Retailers dangle sign-up bonuses to incentivize you to get one of their credit cards. For example, they might offer 10 percent off your first purchase,” says Rossman. “That’s worth it if you’re making a large purchase that you can pay off before interest hits. But it’s probably not worth it if you’re going to carry a balance, or if it’s a small purchase, or if you’re not planning to shop at the store much in the future.”

That’s why you should think twice before you apply for a store credit card or co-branded retail credit card. When you compare the average credit card’s interest rate of about 21 percent with the average store credit card rate of around 29 percent, it’s clear that you’ll pay much more in interest charges if you don’t pay off your balance by the end of your store cards’ promotional deferred interest period.

Retail cards can help build credit

Retail cards tend to be easier to qualify for, on the other hand, even for those with a spotty or limited credit history. That means applying for a store credit card or co-branded retail credit card may help you build up your credit score, while also allowing you to take advantage of discounted prices at your favorite stores. Because every dollar counts during the holiday shopping season, these discounts can result in substantial savings if you use store credit cards or department store credit cards.

Yet before signing up, make sure you’re able to make your payments on time and pay off your balance before any promotional period ends to avoid paying interest. And if building credit is a priority for you, confirm that the retail card you’re considering reports your activity to credit bureaus — surprisingly, not all of them do.

Another positive is that many retail cards don’t charge annual fees. That means you can take advantage of compelling deals from time to time, even if you don’t use your card regularly.

The bottom line

With the holiday shopping season coming up, merchants are likely to try enticing you into signing up for their retail credit cards — often with significant discounts on your purchases.

However, with the average rate on these cards hitting a record 28.93 percent (compared to about 21 percent for the average credit card), you could face steep interest charges if you aren’t careful. While a number of retail credit cards offer deferred interest deals, you may wind up paying interest on your average daily balance if you haven’t paid off your balance in full when the promotion ends. While these cards may be helpful if you’re trying to build up credit or take advantage of special savings, it’s important to watch out for their potential pitfalls. Think twice before you apply for a store credit card or co-branded retail credit card.

Methodology

Bankrate surveyed 107 retail credit cards in mid-September 2023, using publicly available terms-and-conditions disclosures. We selected for the study each of the 100 largest retailers, as defined by the National Retail Federation based on 2022 sales, that offers a credit card program. We included 54 co-branded cards and 53 store-only cards in total. When a card offered an APR range, we included the midpoint of the range in the overall averages.

Information about the Capital One Walmart RewardsⓇ MastercardⓇ, Apple Card, Costco Anywhere VisaⓇ by Citi and Amazon Secured Card has been collected independently by Bankrate. Card details have not been reviewed or approved by the issuer.