The Credit Card House of Cards
Retailers are celebrating a ghost. While headline numbers for Q3 2025 suggest a rebound, the underlying mechanics reveal a consumer base breathing through a straw. The purported growth at Macy’s and Nordstrom is not a triumph of brand loyalty. It is the result of a desperate reliance on high-interest credit and predatory financing. As of November 7, 2025, the average interest rate on retail-branded credit cards has surged to a staggering 28.9 percent, according to data from the Federal Reserve. The reality is simple. Consumers are not wealthier. They are more leveraged.
The Macy’s Paradox
Macy’s recently reported a 1.4 percent uptick in net sales for the quarter ending October 2025. On the surface, this looks like a win. Peek behind the curtain. Their credit card revenue, which historically buffered their bottom line, has cratered by 12 percent due to rising delinquency rates. People are swiping, but they are no longer paying. This creates a toxic lag in the balance sheet. When a retailer becomes a de facto bank for subprime borrowers, the retail floor becomes a liability. The 150 store closures previously announced are not just optimization. They are a retreat from a burning building.
Kohl’s and the Mid-Market Collapse
Kohl’s remains the industry’s most concerning signal. Their comparable store sales dropped 4.2 percent in the latest report, a figure that Reuters analysts attribute to the evaporation of the middle-class discretionary budget. While high-end retailers like Nordstrom benefit from the top 10 percent of earners who remain insulated by stock market gains, Kohl’s serves the demographic currently being crushed by the cost of essentials. In November 2025, the price of basic services is still rising faster than wage growth, leaving no room for a new pair of sneakers or a kitchen upgrade.
Dissecting the Q3 2025 Performance
The following data compares the year-over-year (YoY) performance of major retailers as of the first week of November 2025. Note the disconnect between revenue and actual foot traffic.
| Retailer | Q3 Revenue Growth (YoY) | Foot Traffic Change | Credit Delinquency Exposure |
|---|---|---|---|
| Macy’s | +1.4% | -2.1% | High |
| Nordstrom | +3.2% | +0.5% | Low |
| Kohl’s | -4.2% | -5.8% | Moderate |
| Dillard’s | +0.8% | -1.2% | Moderate |
The Buy Now Pay Later Trap
Retailers are leaning heavily on Buy Now, Pay Later (BNPL) integrations to mask the drop in purchasing power. This is a technical sleight of hand. BNPL services do not always report to credit bureaus in the same way traditional cards do, creating a shadow debt bubble. As of early November 2025, an estimated 18 percent of holiday purchases are expected to be financed through these short-term loans. For retailers, this provides an immediate sale. For the economy, it creates a deferred crisis. We are seeing a shift where the “transaction” is no longer the end of the process, but the start of a debt cycle that many consumers cannot escape.
Inventory Bloat and the Discount War
Profit margins are being cannibalized by inventory mismanagement. To keep the appearance of growth, retailers are engaging in aggressive discounting cycles earlier than ever. The 2025 holiday season effectively began in mid-October. This “Black Friday Creep” is a sign of weakness, not strength. If a retailer cannot sell product at full price in November, they are essentially liquidated stock under the guise of a holiday sale. Yahoo Finance data shows that gross margins across the sector have contracted by an average of 210 basis points since this time last year.
The Road to January 2026
The true test arrives on January 15, 2026. This is the date when the first major wave of post-holiday BNPL payments and credit card statements hit the mailboxes of American households. Watch the personal savings rate. It is currently hovering at a dangerous 3.2 percent. If that number dips further by the end of Q4, the retail recovery will be officially exposed as a credit-fueled mirage. The next milestone to monitor is the Q4 earnings calls in early 2026, where we expect to see a massive spike in loan loss provisions across the board.
