Retail Store Cards Dirty Little Secret
They say it’s 𝗙𝗢𝗥 the customer
But it’s really 𝗧𝗢 the customer
When companies put the customer first, they do things 𝗙𝗢𝗥 the customer
When they put themselves first, they do things 𝗧𝗢 the customer
It starts with a friendly gesture—a deal that feels too good to pass up.
“Sign up for our store card and get 40% off your purchase today!”
For those who know this trickery and how to game the system, it’s a great deal…
For others, it is financial quicksand waiting to trap them.
This practice is not new, but in 2024, retailers and their banking partners elevated it to a whole new level.
In anticipation of Federal Reserve rate cuts, many U.S. retailers and their bank partners have hiked their store card interest rates by unprecedented amounts—some by 5 percentage points or more. To be clear, this wasn’t about protecting customers. It was about protecting profits.
The worst offender was Big Lots. Struggling with poor business performance, they took advantage of their customers and increased their interest rate by a staggering 6 points, bringing it to 35.99%. That’s higher than many payday loans!
When CNBC reached out for comment, Big Lots offered this statement:
“We work closely with our banking partner, Comenity Bank, to ensure APR adjustments are made responsibly and in line with overall industry standards. Our goal remains to empower our customers to purchase what they need and pay over time, ensuring they have access to essential items without financial strain.”
But here’s the irony: Big Lots filed for bankruptcy. The idea of “empowering customers without financial strain” rings hollow when the practice they defend drives customers deeper into debt.
And Big Lots isn’t alone. Even retail giants like Gap got in on the act, raising their store card interest rate by 5 points to 34.99%. Hmm, can this be why they just provided a positive full-year outlook to Wall Street?
Here’s the uncomfortable truth: store credit cards aren’t just a side hustle for many retailers—they’re a lifeline.
A 2023 report by Citi analyst Paul Lejuez revealed that 49% of Macy’s operating profits in 2022 came from its credit card program. That’s nearly half of their profits, not from selling clothes or home goods, but from customers trapped in high-interest debt.
It’s a pattern repeated across the industry. As traditional retail struggles in a competitive landscape, store card programs have become a crutch—a way to squeeze more out of customers even as they slash prices on the sales floor.
Retailers and their banking partners have perfected the art of wrapping financial traps in shiny packages positioned as customer benefits. The promise of savings today often leads to financial strain tomorrow. And as 2024 has shown, the lengths these companies will go to protect their profits know no bounds.
Read the full CNBC article – Dozens of retailers jacked up interest rates on store cards ahead of Fed cuts.
