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.