A bad deal gets worse — interest rates on retail credit cards hit a record high, here's what to consider instead

If you're a regular shopper, you've probably been offered at least a few retail credit cards. They can sound enticing but often come with a catch, like a high interest rate. In fact, the average store card now charges a record 28.93% APR, according to Bankrate's latest retail credit card survey — up from 26.72% in 2022 and 24.35% in 2021. Store-only cards charge an average of 30.24% interest, substantially higher than the average 21.19% interest on general-purpose credit cards.

According to Bankrate senior industry analyst Ted Rossman, the line in the sand for retail cards has traditionally been a 30% APR. "In fact, 29.99% was an artificial barrier that few dared to cross — for psychological reasons, mostly," Rossman said in a statement. "But the market has blown past that threshold given the Fed's aggressive series of interest rate hikes over the past year and a half."

Four cards actually come with an eyewatering 33.24% APR, the steepest in Bankrate's survey: The Academy Sports + Outdoors Credit Card, the Burlington Credit Card, the Good Sam Rewards Credit Card and the Michaels Credit Card.

CNBC Select takes a look at some of the downsides to retail credit cards and a few alternatives to help you avoid soaring interest rates and earn rewards for your spending.

Retail credit cards can look like a great deal at first, offering large discounts on your first purchase or 0% interest for a limited time. But if you miss a payment, you're often required to pay retroactive interest on your initial balance, which can make them extraordinarily costly.

Store cards are especially popular around peak shopping periods, like holidays. But it's important to not spend more than you can afford or you could be stuck with a card with an APR over 30% and no useful features. Carrying a balance on a card with such a high APR can be incredibly expensive

Additionally, the rewards programs of retail credit cards are often lackluster — awards for spending are usually much less valuable and less flexible in the way you can redeem them compared to a card that earns cash back or flexible rewards points.

If you're offered a retail credit card, take the application home and do some research online first. Don't accept something just for a quick discount — in the long run, it could cost you a lot more.

Tempted by a store card's introductory offer? You might want to investigate traditional credit cards that have a 0% APR intro period, earn you cash back or have travel benefits.

The Chase Freedom Unlimited® card is a great option for earning cash back and doesn't charge an annual fee. With the card, new cardholders earn an additional 1.5% cash back on everything you buy (on up to $20,000 spent in the first year) - worth up to $300 cash back! You'll earn 6.5% cash back on travel purchased through Chase Travel, 4.5% cash back on drugstore purchases and dining at restaurants (including takeout and eligible delivery service), and 3% on all other purchases (on up to $20,000 spent in the first year). After your first year or $20,000 spent, enjoy 5% cash back on travel purchased through Chase Travel, 3% cash back on drugstore purchases and dining at restaurants, including takeout and eligible delivery service, and unlimited 1.5% cash back on all other purchases. Plus,
While cardholders will also enjoy a 0% intro APR for the first 15 months, even the variable APR of 20.49%–29.24% is lower than what many retail credit cards charge.

If you purely want to focus on getting the lowest interest rate possible, the Wells Fargo Reflect® Card offers a 0% intro APR for 21 months from account opening on purchases and qualifying balance transfers (18.24%, 24.74%, or 29.99% variable APR afterward).

For those who prefer to rack up flexible benefits while shopping or dining out, the American Express® Gold Card is a great option. With a 21.24% to 29.24% variable APR on eligible charges, you can earn 4X points at restaurants and U.S. supermarket purchases.

Travel perks include 3X Membership Rewards points on flights booked on amextravel.com or directly with an airline, plus up to $120 in Uber Cash annually, up to $120 in dining credits and no foreign transaction fees when you travel abroad.

The average interest rate on retail credit cards has hit an all-time high, yet another reason to think twice about getting one. Whether you want cash back, travel perks or a long 0%-intro-APR period, chances are there's a traditional credit card that's a better fit for your needs.

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