Annual interest rates on national merchants' private-label credit cards are on the rise, according to a study published by Rep. Anthony Weiner, D.-N.Y.
Weiner said that because of these higher rates, consumers need protection through clearer disclosure of merchants' credit card terms at the point of sale.
The average annual percentage rate for 35 credit cards in the study was 23.83%, up 212 basis points from 2008, according to Weiner, who announced the results Nov. 14.
Weiner's office conducted its research this month by evaluating credit card offers for New York City residents. The offers were found on the websites of major retailers.
The lawmaker's study also examined past data for private-label card offers.
Radio Shack Corp., at 28.99%, had the highest interest rate among the store cards measured. Next were Staples Inc. and BBY Solutions Inc.'s Best Buy, both offering cards with interest rates as high as 27.99%; Home Depot Inc. at 25.99%; and Sears Holdings Co.'s Sears card at 25.24%.
Store cards' interest rates are substantially higher than the rates on cards offered through banks, Weiner said.
The average interest rate on a bank card is 14.48%, according to CreditCards.com, a website that monitors national credit card rate offers weekly.
The study also found that "teaser" rates on private-label credit cards are higher than those applied to bank cards.
For example, the interest rate on Nordstrom Inc.'s credit card can rise to 23% from 11% if customers fail to make a minimum payment for 60 days; Target Corp.'s credit card rate rises to 23% from 13% under similar circumstances, according to the study.
Many private-label credit card programs offset their interest rates with promotional financing. Home Depot is offering customers no interest on purchases if they pay off the balance within 18 months of the transaction.
Many customers fall prey to high interest rates that kick in when the promotion ends because the details are not disclosed prominently enough, Weiner said.
"Retailers promise big savings … but they're doling out big bills on customers," Weiner said in a press release, urging shoppers to "leave home without them" this holiday season.
Weiner last year introduced legislation to amend the Truth in Lending Act. His measure would have required merchants to place signs at the point of sale to "conspicuously" display the terms of any credit and charge cards offered in the same way terms are disclosed on card applications.
Legislators referred the bill to the House Financial Services Committee, where it stalled.
