Use credit cards and don’t pay them in full every month? You need to know this (2024)

I want to delve into how some major credit cards are raising their annual percentage rates (APR) to record high levels. Some credit cards are more expensive than ever.

Two months ago, The Watchdog reported how Synchrony Bank, which handles the JCPenney credit card, announced in a recent letter to our household that the interest rate for purchases is climbing to 34.99%. A late payment fee is $41 and, while they are hitting you there if you have two late payments within one year your interest rate will jump to 39.99%. Let’s not forget the $2 paper statement fee.

Think about that: a 40% interest rate. That’s so high maybe the mob will give you a lower rate. OK, just kidding.

The average credit card APR rate, according to Wallethub is 22.89%.

Ten years ago the average was around 13%.

The other day I received a second notice, this one from Comenity Capital Bank, which handles Dell accounts. They are lifting their APR to 30.99%.

Typically, when I need a new computer, I buy it from Dell and put it on my Dell card. So with an APR of 30% that means I could be paying as much as $360 in interest for the next 12 months.

My new computer doesn’t cost $1,200. It might actually cost $1,560. Of course, the faster you pay the less you pay in interest.

Here are some numbers, courtesy of the U.S. Consumer Financial Protection Bureau.

The 190 million Americans who use credit cards have $1 trillion in credit card debt.

The CFPB found that the top 10 companies have 83% of the business. This is important because the agency found that large banks offered the worst terms and higher rates than offered by small banks and credit unions. Each of the nine largest credit card companies offer at least one product with more than a 30% rate.

The smaller companies offer better terms, sometimes between eight to 10 points lower than the majors.

Here’s an important note from the CFPB, which applies to smart shopping:

“When a small group of companies dominate the market, it can make it much harder for smaller competitors to break through to consumers, even when they offer far better prices. Holding significant market share can also make it easier for large companies to afford eye-catching marketing schemes, like celebrity endorsem*nts, sign-up bonuses, and online ad campaigns.”

It continues: “Large credit card companies’ marketing tactics can only make it harder for smaller companies to get noticed. They also complicate the factors consumers consider, obscuring important features like interest rates and fees.”

This is where I could make the argument in favor of paying off monthly credit card bills in full. But that’s not a fair argument. With utility expenses and insurance rates jumping to record numbers, most people don’t have the luxury of making full monthly payoffs. That means many Americans are paying a lot more for items than they realize.

A smart consumer should check their updated APR before using a card. When shopping, remember to take the price tag and then tack on another 20 or 30% in interest for the true price.

If you’re saying you like to use a certain card because you get reward points, hear this warning from the CFPB: “Redeeming those rewards may itself be a complicated and confusing process with restrictions, expiration dates and varying point values depending on how they are redeemed.

Hope that helps.

Supreme Court ruling

The Watchdog wants to share my amazement that the U.S. Supreme Court recently ruled in a 7-2 vote to protect the CFPB’s independence.

I thought after a lower appeals court ruled against the bureau, which was created by Democrats, it would have been slapped down by the conservative high court.

Not only did that not happen, but Justice Clarence Thomas wrote the majority opinion. Not known for his pro-consumer mindset, Thomas wrote that it was OK for the CFPB to get its funds from the Federal Reserve and not through a direct appropriation from Congress because that’s how Congress set it up.

The suit was brought by payday lenders. Their lawyer badmouthed the bureau, calling it “the most independent agency in American history.”

Why is that likely true? The CFPB can’t be defunded by Congress, like other government programs.

It means the one government agency that is designed solely to protect consumer finances’ bad practices lives to fight on our behalf.

The American Bankers Association released a statement asking Congress to continue its efforts to force more accountability on the CFPB. It called the agency “a rogue regulator.”

The CFPB said in a statement it will continue “to take steps to ensure that the consumer credit card market is fair, competitive and transparent and to help consumers avoid death spirals that can be difficult to escape.”

If that’s going rogue, count me in.