MACY’S shoppers have been notified of a sizable increase in interest rates on their credit cards this month.
The increase was detailed in a letter sent to customers who have the retailer’s cards in their wallets.
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A new rate has been set at a whopping 34.49%, after the previous rate of 31.99%, according to the letter obtained by Houston Chronicle.
To give you an idea, the average credit card interest rate for July 2024 is around 24.62%, according to Investopedia.
Store credit cards have a higher average of about 28.93%, meaning Macy’s effectively got a raise of just under 6%.
Bankrate senior industry analyst Ted Rossman said he wasn’t shocked by Macy’s move, according to a recent conversation with San Diego’s CBS affiliate KFMB.
“I mean, I follow this closely, so I’m not shocked, but apparently, yes, it’s a very high interest rate,” Rossman said.
He added that retailers charge the highest annual percentage rate (APR) in the United States.
There is usually a difference between interest rates and APRs.
APRs typically include the interest rate plus various other additional fees and insurance costs – unlike interest rates, which only include “the percentage charged on the principal amount of the loan,” for example. Capital One.
For many credit cards, the APR is the same as the interest rate, and this is likely the case with Macy’s cards.
WATCHING CLOSELY
Rossman noted that retail giants like Macy’s, which offer credit cards, have been following the actions taken by the Federal Reserve to determine interest rates and APRs.
“So credit card rates have reached record levels in recent months,” Rossman told KFMB.
“The national average has jumped about four and a half points since the Fed started raising rates, some cards have jumped even more.”
He cited Petco and ExxonMobil as charging interest rates above 30% now, similar to Macy’s.
While Rossman said the increase is primarily due to retailers monitoring the Federal Reserve’s increases, they likely also raised rates as the Consumer Financial Protection Bureau (CFPB) seeks to reduce late fees.
APR vs. interest rate
Interest rates and annual percentage rates (APRs) are not the same.
- Interest rates refer to the percentage charged on the principal amount of the loan until it is paid off.
- APR percentages include the interest rate, plus any insurance costs, fees, or closing costs that a lender may also charge on a loan.
- In most cases with credit cards, APR percentages are the same as interest rate percentages.
- Customers can often select fixed or variable APRs on other loans.
- A fixed APR means that the interest rate and all other fees are fixed at a certain percentage for the entire loan.
- A variable APR changes with the US market.
Credit: Capital One
CONSUMER RESOLUTION
The CFPB has been pushing for some time to make the overdraft penalty and late fees much lower for American consumers.
Rossman noted that the proposal was almost signed into law in May, but was delayed by a federal judge and still needs to go through court proceedings.
Credit card retailers rely on late fees to increase revenue, and with the possibility of that disappearing, they have apparently made changes to adjust and keep the money coming in.
With Macy’s interest rate above 34%, Rossman showed through a basic example scenario that a customer who made only minimum payments on a $1,000 credit card purchase would end up paying more than twice as much. of the original value.
It would also take about five years to pay it off in full.
“The total interest expense would be $1,047,” he said.
“So, in other words, you’ve more than doubled your initial outlay.”
Some banks like JPMorgan Chase also confirmed that they would charge customers for previously free services if the CFPB successfully reduced late and overdraft fees.
A credit card expert also revealed top tips for keeping your credit score above 800 for at least 10 years.
This story originally appeared on The-sun.com read the full story
