September 15, 2025
With Retail Credit Cards Holding ‘Sky High’ Interest Rates, Will Their Usage Further Decline?
With retail credit card rates described as astronomical and “sky high” by Bankrate’s Katie Kelton, and their usage declining from 43.9 million originations in 2014 to 16.8 million originations in 2024, what does the future hold for these particular credit vehicles?
Taking a look at the contemporary situation regarding retail credit cards, a recent Bankrate study indicated that the average APR attached to said cards remained over 30% — 30.14%, to be precise — which represents the second-highest average in nearly 20 years, since 2008. Despite the very high rate, it represents a drop in the average since 2024, when that figure was pegged at 30.45%.
That figure stands regardless of Fed rate cuts which closed out 2024, which notably are typically followed by a related drop in credit card, auto, and HELOC interest rates.
Ted Rossman, senior industry analyst at Bankrate, commented on the current state of affairs.
“Card issuers say they charge higher interest rates on retail cards because these cards are easier to get, and delinquencies have increased in recent years. But these are really high rates, and they often apply to all customers who carry balances,” Rossman said. Regarding delinquencies, according to recent data from The Federal Reserve Bank of St. Louis, “the positive trend in the share of people in delinquency is pervasive across geographies and different metrics.”
A few of the study’s other findings:
- Over the course of the past 12 months, 23 of the 110 retail credit cards analyzed increased APRs, 16 stayed pat, and 66 lowered rates. Despite this, the average was pulled upward by significant rate increases.
- Retail credit cards are declining in popularity, with general travel cards and BNPL options filling gaps.
- Retail credit card APRs are almost 1.5 times higher than the average interest rate for all credit cards, measured at 20.12% earlier in September.
- While store-only retail credit cards dragged up the average, at 31.64% APR, co-branded cards (which can be used anywhere credit cards are accepted) came in only slightly lower, at 28.65%.
Do Retail Credit Cards Have Much of a Future?
Given the aforementioned numbers, it may appear as if retail credit cards face an uncertain future.
“You might say that buy now, pay later killed the retail card star. Companies like Affirm, Afterpay and Klarna have captured market share with their easily accessible, interest-free payment plans,” Kelton wrote.
And adding on to the diverging origination stats mentioned above, Kelton also noted that private-label originations had declined from a peak a decade ago (2015, at 44.3 million) every year following, barring a one-year blip where originations increased between 2020 and 2021.
Finally, general rewards cards appear to be snatching a portion of market share. Citing its previous-year Credit Card Rewards Survey, Bankrate indicated that 60% of Americans hold a rewards-based credit card. Of those who do, fully half (50%) cited cash back as their preferred card feature, compared to just 3% who indicated that bonuses such as extended warranties or purchase protection were top of mind.
Discussion Questions
Is the end of the retail credit card inevitable? Why or why not? What can issuers do to incentivize consumers to hold their cards versus competing options?
Are the increased rise in delinquencies the primary motivating factor in persistently high APRs among retail credit cards, or are other factors at play, in your opinion?
Poll
Loading …BrainTrust
Perry Kramer
Managing Partner, Retail Consulting Partners
David Naumann
Marketing Strategy Lead - Retail, Travel & Distribution, Verizon
Jamie Tenser
Retail Tech Marketing Strategist | B2B Expert Storytelling™ Guru | President, VSN Media LLC
Recent Discussions
More Discussions
Has Kroger Discovered the Limits of Automated Warehouses?
Kroger is winding down its relationship with Ocado, citing cost overruns and a reorganization of its…What Can Ross Do To Cement its Recent Success Story?
Ross has seen strong sales and projects this trend to continue. How can it best cement…Is Cyber Week Set To Smash Sales Records This Year, as Salesforce Suggests?
Salesforce suggests that Cyber Week will set records in terms of sales this year. Is this…
Retail credit card use is waning among younger consumers, mainly because they prefer more flexible options such as buy-now-pay-later. Among older consumers, who primarily use them as a source of credit, their popularity is also fading because of high interest rates. However, there are a lot of consumers who use store cards to access rewards and benefits. So, they are in no danger of disappearing entirely. The worry for many retailers, however, is that even fading usage can have a sharp negative impact since credit card profit sharing is an important component of the profit and loss account.
Credit card holders are segmented into two groups: those that can and do pay their outstanding balances and want to collect the loyalty points, and those who can’t pay off the balance but choose to use a credit card anyway. With the surge of alternative methods of delayed payment, mentioned in the article, the second group may well disappear because the interest rates, when combined with rising inflation are untenable. The average consumer can’t service the debt among rising costs.
The terminology is a bit confusing here – does a “co-branded” card even belong in this category? – but the pattern is clear enough: continued decline. And that’s hardly surprising since the acceptance of the three (four? five?) major general purpose cards by retailers – something that happended decades ago – has largely made them superfluous; what they are useful for, is for savvy shoppers who obtain the various perks that have been added to them, but pay timely and avoid the fees (of course that’s often a lot of work for little gain) The other natural target is people who can’t get a card somewhere else – IOW the polar opposite of the first type of customer – but that hardly seems like a lucrative group to pursue… for most stores, anyway.
Retail credit cards aren’t necessarily doomed, but their role is shrinking as consumers gravitate toward alternatives like BNPL and flexible rewards cards. High APRs and rising delinquencies make store cards less attractive, while BNPL offers convenience and lower upfront costs — especially appealing to younger shoppers. Still, retail cards can remain relevant if issuers focus on delivering clear value through exclusive perks, flexible financing offers, and transparent, consumer-friendly terms.
Persistently high APRs are partly a response to increased delinquencies, but that’s not the only factor. Elevated funding costs, looser underwriting standards, and profit-sharing with retailers also contribute to the premium pricing. Ultimately, issuers who adapt — aligning benefits with today’s omnichannel shopping behaviors and competing directly with BNPL on flexibility and fairness — will stand the best chance of keeping retail cards relevant.
Retail credit cards, including those once issued by gas-station chains and department stores, used to be the onramp for building consumer credit. These days many college students easily obtain bank credit cards, making those options less needed.
In its heyday, the Sears credit card business (AKA Discover Card) was a massive profit driver. It sold the business in 1993. I also remember my mom carrying a metal “charge plate” for the Abraham & Strauss department store on her key-ring.
Interest rates in the 30%+ range are obviously not attractive to shoppers. Those who don’t have less costly alternatives are probably not excellent credit risks.
Retail issuers therefore have a choice to make: Attract and keep more card users with better deal on store credit or settle for fewer users who pay massive interest rates but default more often.
Which alternative is more profitable? I suspect a cold equation applies to that decision.
Retail credit cards aren’t doomed for the scrap heap yet, but the old model of promote a high interest rate store card in exchange for customer loyalty won’t cut it anymore. Younger shoppers embrace other options to transact purchases because of appealing incentives and benefits from competition like – free drinks/food, special discounts, order ahead benefits, free shipping, cash/credit back, and yes, lower interest rates. It’s about getting them to come to a platform, less a card.
Even Amazon is getting in on the transactional shift toward platforms in Amazon Prime for Young Adults, ages 18-24. After a Free 6-month promotional use expires, they enjoy Prime at half the normal price, but with all the many benefits that go with it.
I’ve had credit cards for over 30 years and the only time I have ever had retail credit cards is when offered significant discounts or a no interest period. My first credit cards were the old $500 bank cards and gas cards. I would venture to guess if you asked the average card holder, very few would be able to tell you the interest rate they pay on their cards. Regardless, I agree with my colleagues about the fate of retail cards. However, the only other factor I would add has little to do with the credit card themselves but with the practice of charging credit card holders “processing fees.” That has dramatically changed my behavior; I’ve even dusted off my old “checks!”
You prompted me to look at my AMEX card. On the front, “Member since 1970”. Somebody is really old.
We never have retail cards, except as you say, if they offer a significant discount on a purchase that already has a considerable discount. It is a great game with Bloomingdale’s. “We’ll give you 20% off if you sign up for our credit card now”. So you sign up, pay it off, and cancel the card. Guess what happens next. We must have played this game five or six times over the years. One wonders if they will ever learn?
So no, they will not disappear. It is easy money for the retailer, and they are not concerned about the interest rate. The higher the better.
It is outrageous that credit cards can charge a 30% APR and there should probably be regulation on maximum interest rates. There is a bipartisan proposed legislation to cap credit card interest rates at 10%, but I doubt it will ever pass. The high interest rates are negatively impacting low income consumers and driving many into bankruptcy. Credit cards will continue for many years, until there are better alternatives. Consumers that can pay off their balances will definitely continue to leverage retail credit cards for their loyal brands to reap the reward benefits.
Retailer credit cards will continue to decline in share of wallet. However, they are far from the scrap heap. For a large number of specialty retailers private label and co-branded cards still account for greater than 40% of their sales. When you factor in that these cards have no interchange fees for the retailer and often result in additional revenue being returned to the retailer by the sponsoring bank. With this type of financial impact to the retailer, the retailers will find a way to adjust to maintain a relevant customer base.
Additionally, the more senior demographics enjoy the features of being able to walk into a store without their card, provide a few pieces of information and make purchases. this type of convinces will maintain value for at least the next 7-10 years.
Any customer that pauses long enough to do the math is going to back off retail credit cards. Unless…at the same time they figure out how to access all the perks and avoid the crazy APR’s. I use a Best Buy credit card every now and then. They offer interest free payoff windows, so why not? It’s all about consumers being able to manage cash flow. Are credit cards really for the credit, or for the convenience of not having to carry a checkbook everywhere? If I pay the cards off every month, I don’t have to worry about the crazy APR’s, and the convenience, the miles, and the perks add up.
I wonder how many users have any idea of what interest rate they are taking on?
Retail credit cards’ obscenely high APRs make them the consumers’ choice of last resort. Mobile wallets, buy-now-pay-later services, and embedded finance are offering more seamless checkout experiences with less punitive conditions. The revenue retailers make on their cards may offset declining retail sales and margins, but that is not their core business. When companies allow adjacent revenue streams to inform their core behaviors, you get confused and misaligned strategy execution and eventually dissatisfied customers.
The real tragedy is that carrying balances on the 30% rate cards are more likely to be the ones less able to pay off balances. Often they will even struggle with minimum payments. Thus the higher rate to cover the higher repayment risk.
That puts theses shoppers in an increasing debt spiral that’s difficult to escape.
No easy answers. A program of personal finance training underwritten by those profiting from these higher rates is worth exploring.