Run it with less chaos · Every business
What Unsold Inventory Really Costs Each Month
Product that sits on a shelf keeps costing money after it is paid for, in interest, space, expiry and loss, and for a small business financing stock on a credit card that cost can reach more than a third of the stock's value in a year.
At a glance
- Carrying cost is what it costs to hold inventory until it sells: the cost of the money tied up, plus storage, shrink, expiry and insurance, usually stated as a percentage of inventory value per year.
- The largest piece for many small businesses is the cost of money; the average rate on credit card accounts assessed interest was 22.36% in August 2026, about $18.63 a month for every $1,000 of stock carried on a card.
- In an illustrative business holding $15,000 of stock, carrying cost comes to about $468 a month, or 37.5% of the stock's value a year, when the stock is financed on a card.
The number and where it comes from
The 22.36% rate comes from the Federal Reserve's consumer credit release, published through the St. Louis Fed, and measures the average interest rate on credit card accounts that were charged interest in August 2026. For an owner who pays a distributor by card and carries the balance between busy months, stock bought that way costs about 1.86% of its value each month in interest alone (22.36% ÷ 12), and a business that pays from a line of credit tied to the prime rate, 7.00% in early October 2026, pays much less, about $5.83 a month per $1,000.
Interest is only one part of the cost. The National Retail Federation's 2023 security survey put shrink, the stock lost to theft, damage and errors, at 1.6% of sales across U.S. retailers in fiscal 2022, and products with a shelf life, such as color, skincare, supplements and some automotive fluids, lose value as they age, while every shelf, cabinet and storage unit holding them has a cost of its own.
The owner's first reaction is usually reasonable: We already paid for it, so it isn't costing us anything to keep. The purchase price is spent, but the cash it used is still missing from the account every month the product sits there, and a card balance, a slow-moving shelf and an expiry date keep adding to that cost.
| Component | Annual rate | Annual cost on $15,000 of stock | Source |
|---|---|---|---|
| Cost of money (credit card) | 22.36% | $3,354 | Federal Reserve, August 2026 |
| Shrink | 1.6% | $240 | Assumption based on NRF retail average (a share of sales, applied here to stock) |
| Expired or dated product | 5% | $750 | Assumption |
| Storage space | $100 a month | $1,200 | Assumption |
| Insurance on stock | 0.5% | $75 | Assumption |
| Total | 37.5% | $5,619 | Calculated |
The worked calculation
| Input | Card financing | Prime-rate financing | Source |
|---|---|---|---|
| Stock on hand, at cost | $15,000 | $15,000 | Assumption |
| Cost of money | 22.36% ($3,354) | 7.00% ($1,050) | Federal Reserve via FRED; calculated |
| Shrink, expiry, storage and insurance | $2,265 | $2,265 | Calculated from Exhibit 1 ($240 + $750 + $1,200 + $75) |
| Annual carrying cost | $5,619 | $3,315 | Calculated |
| Monthly carrying cost | $468 | $276 | Calculated (÷ 12) |
| Share of stock value per year | 37.5% | 22.1% | Calculated (÷ $15,000) |
The useful reading of the table is per item. A $40 bottle that sits for six months on a card costs about $7.50 to carry at the 37.5% annual rate (calculated: $40 × 37.5% ÷ 2), so a 10% case discount on slow stock is used up in a little over three months (calculated: 10% ÷ 37.5% × 12 = 3.2 months).
How you compare
- Financing: check whether any stock purchases sit on a card balance; at 22.36%, financing is the biggest single cost in the illustration.
- Stock on hand: U.S. retailers held about 1.27 months of sales in inventory in July 2026, according to Census Bureau data; a service business holding several months of product sales carries several times that cost.
- Your own baseline: multiply your stock at cost by your own financing rate, add a year of expired product and storage, and divide by 12.
The next step is to put your own stock value and financing rate into Exhibit 2 and compare the monthly figure with the discount you receive for ordering in bulk.
Sources
- Board of Governors of the Federal Reserve System via FRED. Commercial Bank Interest Rate on Credit Card Plans, Accounts Assessed Interest (TERMCBCCINTNS). August 2026.
- Board of Governors of the Federal Reserve System via FRED. Bank Prime Loan Rate (DPRIME). October 2, 2026.
- National Retail Federation. National Retail Security Survey 2023. 2023.
- U.S. Census Bureau via Federal Reserve Bank of St. Louis. Retailers: Inventories to Sales Ratio (RETAILIRSA). FRED, July 2026.
Related reading: How Product-Selling Service Businesses Free Up Cash Tied Up in Inventory · Retail Inventory for Salons and Spas: What to Stock and How Much · How to Set a Reorder Point (With a Simple Formula)
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