Dozens of retailers jacked up interest rates on store cards ahead of Fed cuts

[BumRushDaShow]

Source: NBC News/CNBC

Nov. 22, 2024, 10:52 AM EST / Source: CNBC


Dozens of the largest U.S. retailers and their bank partners jacked up interest rates on their store-branded cards to record highs in the months before the Federal Reserve began cutting rates, as the companies looked to pad profits during a stretch of sluggish sales. At least 50 companies — including Big Lots, Gap, Petco, Burlington, Macy’s and TJX Companies — increased the APRs on their credit cards between September 2023 and September 2024, according to a review of data gathered by Bankrate.com that examined the nation’s 100 largest retailers.

Bankrupt home goods chain Big Lots raised its APR by 6 percentage points from 29.99% to 35.99% — the largest increase out of the retailers reviewed by Bankrate. Gap made the second largest increase, a 5 percentage point hike on its Banana Republic, Athleta, Old Navy and namesake cards. Petco came in third with a 4.5 percentage point increase. Big Lots, Academy Sports, Burlington, Michael’s and Petco are tied for having the highest APR among the companies Bankrate tracked, at a staggering 35.99% as of September.

“Up until this rate hiking cycle that we saw from the Fed in 2022 and 2023, 30% was a threshold that few credit cards dared to cross,” Ted Rossman, Bankrate’s senior industry analyst, told CNBC. “But they’ve gone from high to higher these past few years because the Fed pushed rates higher by five and a quarter points and all of a sudden, 29.99% was not the high end anymore. Now we see it’s very common for these store cards to charge over 30%.”

However, it’s not just monetary policy pushing APRs higher. Just before the Fed began its rate-cutting cycle in September, many retailers and their bank partners raised interest rates on their store cards to protect their profits when the federal funds rate — which determines their own interest rates — came down.

Read more: https://www.nbcnews.com/business/consumer/dozens-retailers-jacked-interest-rates-store-cards-ahead-fed-cuts-rcna181348

[UpInArms]

1. Assfugs

They just never get enough …

[Yavin4]

2. Just wait until the tariffs start

Retailers that don't have any imported goods will raise their prices and APRs on their credit cards. It will be a bonanza.

[mpcamb]

3. Why is ANYBODY ever allowed to charge any of the usurious rates mentioned?

Is it just me? Those numbers all seem exorbitant, extortionate and outrageous.

[MichMan]

4. Why would anyone be dumb enough to use a charge card at places like Big Lots or Michaels in the first place ?

At even half of those rates. Nothing there is a necessity.

[jmowreader]

8. Michaels, I can see

A LOT of wedding planners use Michaels as their supply house. The nice thing for them is the Michaels credit card can only be used at Michaels so they don't have to sort their non-business expenses from their business ones when tax time comes.

[MichMan]

9. Wedding planners should be paying off their balances quickly, so interest rates shouldn't matter

[Intractable]

16. These companies often offer fabulous deals up front to get their card to use on their merch.

The companies gamble that some will not be able to pay it off in time, and thus fall into the interest trap.

[DENVERPOPS]

15. Hey

The "usury" rate of interest stood at 12% until Reagan took office, then it jumped to 21%? or 24%...........

All interest was deductible, until Reagan took office, then only mortgage interest was deductible

I could go on and on...........

[MichMan]

17. Reagan couldn't have done it without congress.

Why did they pass it ?

[DENVERPOPS]

18. No Idea............

There were many from both sides of the aisle that were infatuated with Reagan initially....

[Magoo48]

5. I tell my friends and not frequent those businesses at all. That's what I can do.

[nmmi]

6. But since the Fed rate cuts began on Sept 18, interest rates have plunged, uh, well, no, they've gone up

First on the OP article, the only mention of cutting interest rates since the Fed lowered them by 0.5 percentage points on Sept 18 and 0.25 points on Nov. 7:

Some retailers, such as Macy’s, Nordstrom and TJX, have since passed on the 0.5 percentage point cut that the Federal Reserve implemented in September to cardholders. Still, their APRs are at record highs, sitting between 2 and 2.25 percentage points higher than they were a year ago.

I wrote this in the Economy Group today:

I don't know, but most interest rates have RISEN since the Fed's cuts

The Fed cut rates on Sept 18 by 0.50 percentage points and on Nov 7 by 0.25 percentage points. These are very short term rates - overnight rates that banks lend to each other. That generally affects longer short-term rates, and even intermediate term rates.

But, surprisingly, since Sept 18, the 10 year Treasury yield has risen from 3.74% to 4.41% (and bonds have fallen in value accordingly.).

And, by the way, the yield was 4.43% at the 11/5 election day close, before the election night results Nakba began to unfold, so it's actually a drop (teeny one) since pre-election.

Even the 1 year yield has risen from 3.97% to 4.41%

Its only short term yields that have fallen (and their corresponding securities' prices risen), e.g. the 3 month Treaury yield has fallen from 4.73% to 4.54%.

The average rate on a 30-year mortgage in the US rises to highest level since July, AP, 11/21/24
https://apnews.com/article/mortgage-rates-housing-interest-financing-home-loan-99fa3ab40bf2ad2cad1e554683e70d54

Treasury rates (graphs):
10 Year: https://www.cnbc.com/quotes/US10Y
1 Year: https://www.cnbc.com/quotes/US1Y
3 month: https://www.cnbc.com/quotes/US3m

Kiplinger's explains this counterintuitive phenomenon by saying the economy is stronger than what was anticipated a couple months ago (which tends to push up yields), and there's been a bit of an upturn in inflation too, after months of falling.

People who own intermediate term bonds (like me) or longer term, or even as low as 1 year maturity have seen their bond values slaughtered. I was so hopeful that the bleeding would stop with the rate cuts, but no, the blood is gushing out even faster.

I don't know who the "bond vigilantes" are, but I feel like I've been "vigilanteed".

We'll have more of the same if the tariff fuckheads cause inflation to reheat. (Or the opposite if they screw the economy up enough to cause a real recession).

[Marthe48]

7. We should avoid the store cards

I have a card card and a bank debit/credit card. I pay cash for anything under $20. I use my debit card for most purchases. I use the credit card for gas and for a couple subscription services.
Store cards are notorious for charging higher interest and your information is more vulnerable, so I let the ones I used to have expire and haven't signed up for more.

I read the other day that Americans are carrying a trillion dollars in credit card debt. Could this newest gouging ploy be one of the reasons?

[Dem2theMax]

10. If at all possible, pay cash when you buy gas.

The folks who install card skimmers are notorious for planting them at gas stations. Always pay cash when you purchase gas.

Always go inside the bank, if you need to use an ATM. Never use ones that are outside the bank.
The card skimming folks love to hit the outdoor ATMs as well.

Just a little public service announcement for fellow Democrats.

[Marthe48]

12. Thanks for the tips

I rarely use the ATM at my bank. I'll try to use cash for my gas. I like to fill it, but sometimes, don't give them enough. Or give them too much cash and have to go back for change. I'm a lazy old thing

[Dem2theMax]

14. I know the feeling!

I learned my gas gauge. When it got to a certain point, I knew if $20 or $40 was going to fill it up, based on how low the tank was at that point.
Rarely had to go back inside to get change.

I live in fire country, so my tank never goes below half full. Always need to know I can get out.

[eggplant]

11. We gave up our credit cards decades ago.

It wasn't easy, but with credit counseling, we've been down to just a mortgage payment and our debit cards. We'll never go back.

[Jit423]

13. This is the kind of gouging of the public that VP Harris promised to go after.

The all will be free to gouge as much as they want after January 20.

[Aussie105]

19. Whoever came up with the concept of credit cards needs to . . .

burn in Hell for eternity!

The bank is just lending you some money - there is no reason for the high rates.
Other than greed.

Too easy to spend money you don't have, too easy to go into the interest paying period, too easy to dig a hole you can't get out of.

The people who pay the interest are usually those who can least afford to, all they need is a financial emergency that is more urgent than paying down the card on time.

I use cash all the time, have a debit card and no credit card.

Out of interest, what was the interest when the credit cards first came in?