New York City – At the start of the year’s busiest shopping season, Rep. Anthony Weiner (D-Queens & Brooklyn) warned holiday shoppers to beware of the sky high interest rates charged by store credit cards.  According to a new survey released by Weiner today, stores throughout New York City continue to charge interest rates on their credit cards that are much higher than bank credit card rates, and that approach or even exceed the state’s criminal usury rate of 25%.  Weiner was joined by Rebecca Weber, Deputy Director of NYPIRG.

            Shoppers brave long lines and large crowds during the holiday season to buy gifts for their loved ones.  But if you’re using a store credit card, smiles can quickly turn to sticker shock when the bills come due because of sky high interest rates.

HIGHLIGHTS OF THE WEINER STORE CREDIT CARD STUDY INCLUDE:

·        The survey of over 30 stores shows interest rates on department store credit cards averaging 20.65%, up from 19.45% in 1995.  The national average bank credit card interest rate is 12.98%.

·        Seaman’s and Levitz top the list with a basic interest rate of 24%, just below the state criminal usury rate (25%).  Radio Shack follows close behind at 23.85%.

·        Since 1995, Express has increased the interest rate on its card by a whopping 10.8%, from 12% in 1995 to 22.8% today. 

·        Some big ticket retailers like Best Buy and Comp USA are offering “teaser” deals to lure in potential customers, offering no interest payments for a matter of months.  The catch: in most cases, if you fail to pay your bill within the specified time, the interest rate applies retroactively, and is calculated based on the entire purchase price (not just the portion of the bill you have yet to pay). 

·        Rates on some cards can go through the roof if you have difficulty making payments or have a shaky credit history.  The Sears card escalates up to 29.00%, Radio Shack to 27.85%, Levitz and Seaman’s to 26%, and Brooks Brothers to 25.60%--all above the criminal usury rate.

·        With some bank credit card rates as low as 8.95%, shoppers could save as much as 15.05% by steering clear of store credit cards.

(The full Weiner survey is attached to this release.)

            Retailers rang up more than $7 billion in sales on the day after Thanksgiving this year, officially kicking off the holiday shopping spree.   Experts forecast that retail profits will increase by 5% during this year’s holiday shopping season.

That’s good news for retailers, but for consumers using store credit cards, it can mean some extra coal in the bank account when the dust settles.

Responding to the prevalence of sky high rates, Rep. Weiner announced plans to introduce legislation to make sure consumers who use retail credit cards know what they are getting into.  Weiner’s legislation will require clear and large postings right at the register of the interest rate, grace period and annual fee for that store’s credit card.

“Consumers should steer clear of the high interest rate gamble offered by store credit cards, their buy now pay a whole lot later scheme is just no good,” said Rep. Weiner.  “Even the sweet deals turn sour with teasers that promise big savings but deliver big bills.  Shoppers should shop around for the best deals, and demand better rates and fuller disclosure.  The pay off of the holiday shopping season should be the smiles of your loved ones, not exorbitant pay backs to department stores on their credit cards.”

To compile the store credit card survey, staff in Congressman Weiner’s office contacted 32 major New York City retail stores and consulted their web sites, seeking information on interest rate charged on their store credit card, flexibility with regards to the rate (ex: on time vs. late payment), grace period (time provided after billing date before late fee is applied), and whether there was any deal or mechanism in place by which the interest rate would be forgiven for a specified period of time (ex: no interest for 6 months).  As a matter of practice, interest rates are applied as a finance charge at the end of each billing cycle.

For the purposes of the study, Weiner staff used stores stated standard APR, either according to personnel at corporate headquarters, area stores, and/or listed in the terms and conditions of current on-line applications.  For escalation rates, Weiner staff again used those stated by personnel at corporate headquarters, area stores, and/or listed in the terms and conditions of current on-line applications.  Note that for some cards, rates may decline over extended periods based on credit or payment history.

Data regarding interest rates charged on other financial instruments was obtained from the Congressional Research Service.