From 18% to 38% interest, how much does that credit card purchase really cost you?
Media Contact: Barbara Fornasiero; EAFocus Communications; barbara@eafocus.com; 248.260.8466
Wyandotte, Mich. —December 29, 2025 — Many Americans will be aghast when they open their credit card statements in January to see exactly how much Christmas 2025 cost them. For those who charged more than they can pay off by the due date, Michigan Legacy Credit Union (MLCU) CEO Carma Peters suggests it’s time to go shopping again – but this time for a better credit card interest rate.
“Typically, store credit cards have the highest interest rates. Purchases made over time on store credit cards can carry interest rates of 38% APR. That means at 38% interest, a $500 dollar credit card bill would cost $1,354.70 if only the minimum payment is made each month for the maximum 84 months,” Peters said. “For those who rely on credit cards to help finance not just gifts and extras but everyday necessities, getting the lowest interest rate possible is critical to staying on top of extra fees and avoiding a personal financial crisis.”
Credit unions providing credit cards to members are required by federal law to cap their interest rate at 18%, while there is no federal law capping card companies or banks on the credit card interest rates they charge. Rates are driven mainly by what the market will bear, which is often more than 30%. Further, a drop in interest rates by the Fed generally has little to no impact on consumer credit cards except in the situation where the card has a variable rate and is subject to change when the Prime Rate changes.
Between credit unions at the low end and store cards at the high end, there are varying options that may have particular appeal for a consumer – but they require close scrutiny.
“Many consumers are attracted to specific cards because they want the cash back perk, or the grocery, store, gas or airline points; however, financial institutions have been slowly chipping away at the value of those points – either charging a higher annual fee, requiring a higher spend to get the points or diminishing the actual value of the points,” Peters said. “It’s important to weigh the cost of the card relative to the real value of the points. If the credit card interest rate is in the thirties, and the card is not paid off each month, there is no value in the points. Similarly, some consumers may select a card for its points program and then never actually use the points – while still paying a premium fee for the card.”
The pluses and minuses of peer-to-peer payment apps
The very popular and convenient peer-to-peer payment apps like Venmo and Zelle are used by many as an occasional alternative to credit cards and carry no interest charges in transferring money from one individual’s bank account to that of another individual or retailer. While they seem like a safe and prudent way to pay for select purchases like restaurant meals, services at nail and hair salons and other service-oriented businesses that charge an extra fee for paying by credit card, Peters offers important cautions.
“Commercial peer-to-peer payment apps are not insured or protected at all by a financial institution. That means there is no way to ensure the money goes to the intended recipient and no option to stop payment. Credit cards definitely have the advantage in these scenarios in terms of consumer protection,” Peters said. “It can be wise to use cash when purchasing certain lower-priced services or meals.”
Michigan Legacy Credit Union offers a pay anyone anytime option that includes protections including secure transfer through regulated and insured institutions for member users, while other financial institutions offer similar products. Peters urges consumers to consider these safer-peer-to-peer payment methods but cautions that it is critical for users on any peer-to-peer platform to tightly guard their passwords and security information.
“January is always a good time to commit to practices that keep consumers on the right track to financial stability,” Peters said. “From using strong passwords on financial and banking apps, changing them frequently and not sharing them with anyone, to thoughtful selection and use of the best credit card option, to striving to pay off the balance each month, there are so many relatively simple practices that can be adopted for achieving and maintaining sound financial health. They just require a bit of homework and, admittedly, a lot of discipline!”
About Michigan Legacy Credit Union
Michigan Legacy Credit Union (MLCU) is a member-owned, not-for-profit financial cooperative serving members who live, work, worship, attend school, or own a business in the state of Michigan. Michigan Legacy Credit Union is committed to providing quality financial services at a competitive price, delivered professionally and efficiently while keeping member/owners and their needs first. For additional information on MLCU, visit: www.michiganlegacycu.org.
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