Interest rates on credit cards hit record highs
Oct 23, 2023, 5:16 PM | Updated: Nov 10, 2023, 7:58 am
SALT LAKE CITY — The upside is credit cards help build a person’s credit to qualify for a loan for a car, house or other big purchase. But the downsides are many, one of which is being stuck in debt or trapped in the cycle of paying just the minimum payment.
The average annual percentage rate for retail credit cards hit 28.93%, which is a record, up from 26.72% last year, according to Bankrate.
In 2008, the historical average for retail credit card APRs was 18.14%. In 2023, that number was 28.93%.
Credit cards are like power tools
KSL NewsRadio’s Dave & Dujanovic talk to Rossman who said credit cards are like power tools: Used the right way, they can be helpful, but used the wrong way, they can be dangerous.
Rossman said about 53% of credit card holders typically pay in full every month.
“So for them, credit cards could really be providing a lot of benefits such as rewards and other buyer protections, ranging from fraud protection to purchase protection, extended warranty coverage… maybe travel insurance,” he said.
Rossman added the average interest rate for all credit cards is 20.72%.
“For retail branded credit cards, it’s almost 29%,” he said. “So that’s the big fork in the road whether or not you carry a balance.”
But some store cards, such as Amazon, Target or Best Buy, give shoppers 5% back when they use their card in their store or digital marketplace, Rossman said.
He added that he knows someone who saved $1,000 on appliances by getting a store credit card.
The key is to pay off the debt in full before the interest kicks in.
“We are hearing more and more people using cards for day-to-day essentials like groceries and gas,” Rossman said. “That’s a tough spot to be in if you think about financing that at these hefty interest rates.”
Best tip for debt holders
If you’re stuck in a cycle of credit card debt, Rossman told Dave & Dujanovic he recommends applying for a zero-percent balance-transfer credit card.
“These last as long as 21 months on cards like the Wells Fargo Reflect or the Citi Simplicity,” he said. “I would say don’t add any new purchases in this scenario. Divide what you owe by the number of months in your 0% term. Try to stick to that level of payment plan. Done right that could save you a ton of money and interest.”
Dave & Dujanovic can be heard weekdays from 9 a.m. to noon. on KSL NewsRadio. Users can find the show on the KSL NewsRadio website and app, as well as Apple Podcasts and Google Play.