Industry experts told 10TV sister station CBS 8 that the increase is part of a national trend.
COLUMBUS, Ohio — Macy's has joined the growing list of retailers offering store credit cards with interest rates above 30%.
Macy's sent a letter to cardholders in April announcing that annual interest rates on Macy's cards would jump to 34.49 percent. Industry experts told 10TV sister station CBS 8 that the rate hike is part of a nationwide trend.
“These are very high rates,” said Ted Rothman, senior industry analyst at Bankrate.
Rothman said retail interest rates are already among the highest, and they have been rising steadily, reflecting the Federal Reserve's actions.
“Credit card interest rates have been pushed to record high levels in recent months. Since the Federal Reserve began raising rates, the national average has increased by about 4.5 percentage points, and for some cards, it has increased even more,” Rothman said.
Rothman cited examples of other retailers with APRs over 30%, including Petco and ExxonMobil.
The average for all credit cards is just over 20%.
Rothman said retailers are also raising rates in response to interest rate hikes by the Federal Reserve and moves by the Consumer Financial Protection Bureau to lower late fees.
“Currently, the average late fee on a credit card is $32, but the CFPB is trying to lower that to $8. It was actually scheduled to be lowered in May, but a federal judge temporarily voided it and it's still in court. Because store credit cards rely more on late fees than consumer Amex and Capital One cards, many store card issuers are starting to take other steps to make up for the loss of late fee revenue,” Rothman said.
To combat the new interest rate hikes, Rothman suggests paying off your credit cards in full.
If that's not possible, transfer the debt to another card.
“Let's say you have a $1,000 balance on your Macy's card. You're being charged 34% interest. Transfer that amount, along with any other credit card debt you have on other cards, to a new card with a 0% promotional interest rate, like Wells Fargo Reflect or Citi Simplicity, and you won't pay interest for up to 21 months,” Rothman said.
Rothman said about 80% of the time, customers with good credit can call and get a lower APR, but they might not see much of a difference.
To get an idea of how long it would take to pay off a high-interest bill, CBS 8 asked Rothman to calculate how long it would take to pay off a $1,000 Macy's bill with only the minimum payments at the new 34.49% interest rate.
The answer is as shocking as the APR itself.
“That means you'll be in debt for 58 months – that's almost five years. Your total interest expenses will be $1,047. In other words, more than double what you initially spent,” Rothman said.
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