Macy’s shoppers set for staggering 6% credit card rate increase that could more than double what customers have to pay

MACY'S shoppers were notified of a considerable interest rate uptick on their credit cards this month.

The increase was detailed in a letter sent to customers with the retailer's cards in their wallets.

A new rate was set at a whopping 34.49% after its previous rate of 31.99%, per the letter obtained by the Houston Chronicle.

For perspective, the average credit card interest rate for July 2024 is about 24.62%, according to Investopedia.

Store credit cards sit at a higher average of around 28.93%, meaning Macy's effectively made an increase of just under 6%.

Ted Rossman, a senior industry analyst with Bankrate, said he was not shocked by the change from Macy's, per a recent conversation with San Diego CBS affiliate KFMB.

"I mean, I follow this closely so I'm not shocked, but on the face of it, yeah, that's a really high interest rate," Rossman said.

He added that retailers charge the highest annual percentage rate (APR) in the United States.

There is typically a difference between interest rates and APRs.

APRs typically include the interest rate plus several other added fees and insurance costs — unlike interest rates, which include only "the percentage charged on the principal loan amount," per Capital One.

In the case of many credit cards, the APR is the same as the interest rate, and is likely the case with Macy's cards.

WATCHING CLOSELY

Rossman noted that retail giants like Macy's who offer credit cards have been following along with actions taken by the Federal Reserve to determine interest rates and APRs.

"So, credit card rates have been pushed to record highs in recent months," Rossman told KFMB.

"The national average has jumped about four and one-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 mostly due to retailers' monitoring of the Federal Reserve's increases, they've also likely bumped up the rates as the Consumer Financial Protection Bureau (CFPB) seeks to lower 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 a principal loan amount until it is paid off.
• APR percentages include the interest rate, plus any insurance costs, fees, or closing costs a lender might 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 locked in at a certain percentage for the entirety of the loan.
• A variable APR changes with the US market.

Credit: Capital One

CONSUMER PUSHBACK

The CFPB has been pushing for some time to drop the penalty of overdraft and late fees much lower for American consumers.

Rossman noted the proposition was almost made into law in May, but was delayed by a federal judge and still has to go through court proceedings.

Retailers with credit cards rely on late fee penalties to boost revenue, and with the potential of that going away, they've seemingly made changes to adjust and keep the money coming in.

With Macy's interest rate at over 34%, Rossman showed through a basic example scenario that a customer who only made minimum payments on a $1,000 purchase with the credit card would end up paying over double the original amount.

It would also take them about five years to pay it 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 have also confirmed it would be charging customers for previously free services if the CFPB successfully lowers late and overdraft fees.

A credit card expert also revealed their top tips to keep your credit score above 800 for at least 10 years.