Key takeaways
- Store credit cards may be tempting, but they have their limitations — which include acceptance only at specific brands and chains
- In addition to limited usability, store cards can come with high interest rates and low rewards-earning opportunities.
- If you do a lot of shopping at a single retailer, a store credit card might be worth it — but consider pairing your store card with a general-purpose credit card that offers lower interest rates and allows you to earn rewards on a broader range of purchases.
“Would you like to save 15 percent off today’s purchase by opening our store credit card?” We’ve probably all heard countless versions of that pitch, whether we’re standing at a retailer’s checkout counter or shopping online — and in some cases, the pitch is good enough to convince us to open a new line of credit.
According to 2021 data from CreditCards.com, 68 percent of U.S. adults with retail credit cards have applied impulsively at least once. Only 32 percent of surveyed adults planned their retail credit card applications in advance, which means that a lot of us who open store credit cards do so without thoroughly thinking it through.
That’s why it’s important to understand what store credit cards are and how they work. In most cases, store credit cards aren’t the best credit cards on the market. They often come with higher interest rates and limited rewards options — and unless you get a co-branded retail card, you may only be able to use your store card to make purchases with a specific retailer.
Are store credit cards worth it? Not necessarily. Here’s what you need to keep in mind the next time someone offers the opportunity to apply for a store credit card.
What is a store credit card?
Retailers offer two types of credit cards: store credit cards and co-branded credit cards. Store credit cards — sometimes called closed-loop cards — can only be used at that particular store or chain of stores. A co-branded card, on the other hand, is an open-loop card that can be used anywhere the card network — such as Visa or Mastercard — is accepted. The card may have a particular retailer’s logo on it, but it can be used widely.
Some retailers offer both store credit cards and co-branded credit cards. Amazon, for example, offers both a store card and the Prime Visa. The former only works at Amazon, whereas the latter can be used anywhere Visa is accepted.
Likewise, many of today’s best hotel credit cards and top airline credit cards are co-branded. The Delta SkyMiles® Gold American Express Card, for example, offers rewards and perks when you book Delta flights but can be used at any retailer that takes American Express.
If you’re not sure whether you have a store credit card or a co-branded card, take a look at the logos printed directly on the card. If you only see a retailer’s logo, it’s a closed-loop card that may only be used to make purchases with that particular retailer. If you see both the retailer’s logo and a Visa, Mastercard or American Express logo, the card is co-branded and can be used anywhere.
Store credit card vs. general-purpose card
Beyond where they can be used, the biggest difference between general-purpose credit cards and store credit cards is the scope of their rewards programs. Today’s best credit cards offer a variety of rewards, including cash back, points and miles, and give you the opportunity to earn rewards on many different kinds of purchases. Some credit cards, such as travel credit cards, offer higher rewards on certain types of purchases including flights, rental cars and hotels — but none of these general-purpose cards limit your rewards to purchases made at a specific retailer.
With retail cards — including both store cards and co-branded cards — your rewards are generally awarded within the loyalty programs offered by the retailer associated with the card. Even if the card offers rewards for purchases at other retailers, the highest rewards are nearly always associated with purchases made at the specific retailer. And, frequently, getting the most value when redeeming those rewards requires you do it with that specific brand.
Pros and cons of store credit cards
While retail credit cards aren’t necessarily the best credit cards on the market, they do have their benefits for the right person. Here’s a quick rundown of the pros and cons of store credit cards.
Pros
- Loyalty rewards. If you love a particular retailer and buy from them all the time, using their store card may get you bigger rewards in-store than you might get from a general rewards credit card.
- Bonus offers. Some store cards throw in bonus offers such as coupons, discounts and invitation-only events.
- Easy to qualify for. Store cards can be a good choice if you need to establish a new credit history or you’re trying to rebuild your credit score since they frequently have less-strict credit score requirements than general-purpose cards.
Cons
- High APRs. Retail credit cards charge an average 28.93 percent APR, based on a September 2023 Bankrate study. This means that the costs associated with carrying a balance could easily eclipse the value of any rewards you earn.
- Potentially misleading terms. “Zero percent interest” store offers may actually be deferred interest promotions. If you are still carrying a balance when your promotional period expires, you could incur retroactive interest based on your average daily balance back to your original purchase.
- Low credit limits. Store cards often come with low credit limits, which could lead to a high credit utilization ratio. If store credit cards are the only cards in your wallet, this could hurt your credit score.
- Limited use. While retail cards reward loyalty, store cards are limiting if you can use them only at that particular store or chain of stores.
Should you get a store card?
In most cases, store credit cards aren’t as valuable as a top rewards credit card or well-chosen co-branded card. While store credit cards have their benefits, the drawbacks of retail cards can outweigh any points or discounts you might earn.
When should you avoid store cards?
- When the retailer offers a co-branded credit card. If you have the option between a store card that is only accepted at a specific retailer and a co-branded card that can be used anywhere, the co-branded card is nearly always the better choice.
- When you’re planning on applying for a top rewards card. Many of today’s best credit card issuers have credit card application rules that decline applicants who have opened too many new credit cards in the recent past. The Chase 5/24 Rule, for example, suggests that Chase denies applicants who have opened more than five credit cards from any issuer in the past 24 months.
- When you aren’t sure if you can pay off your balance in full. Since store credit cards have significantly higher APRs than general-purpose credit cards, carrying a balance on a store card can be extremely expensive. Only apply for a store credit card if you are able to pay off your balance in full every month.
When are store cards a good idea?
- When you need to build your credit score quickly. Store credit cards often have more lenient approval requirements than general-purpose credit cards, which means that people with low credit scores or limited credit history could use a store credit card to build credit fast.
- When you shop at the retailer on a regular basis. Applying for a store credit card to save 15 percent on a single purchase doesn’t make sense — but if you shop at a particular retailer multiple times per month, you might be able to justify the application. Just remember that any balance you carry on a retail credit card is likely to be more expensive than you realize, so do your best to pay off your purchases as quickly as possible.
Alternatives to store cards
Choosing an alternative to a store credit card really depends on what you’re hoping to get out of the card — rewards, credit building opportunities or in-store benefits.
If you want a credit card that rewards purchases at a specific retailer, look for a co-branded credit card like the Capital One Walmart Rewards® Mastercard®*. You may also want to consider a “customizable” rewards card such as the Citi Custom Cash® Card, which offers 5% cash back on up to $500 per billing cycle in your top spending category from among a list of options including restaurants, home improvement stores, drug stores, grocery stores and more — which could cover a retailer you frequent.
If you are thinking about applying for a store credit card because you need to build credit, you may want to consider a secured credit card like the Discover it® Secured Credit Card. A secured card allows you to put down a small refundable deposit in exchange for a line of credit, and gives you the opportunity to use credit responsibly and build a positive credit history.
If you’re hoping to receive in-store coupons and discounts from your retail credit card, consider signing up for one of today’s best shopping apps instead. Services like Rakuten, RetailMeNot and Capital One Shopping offer coupons, discounts and cash-back opportunities, helping you save money at your favorite retailers. You can use an aggregator like Cashback Monitor to track where to find the best rewards deals.
The bottom line
Store credit cards reward loyalty, so it can be tempting to sign up for a card from your favorite retailer to cash in on rewards for spending you’re likely to do anyway. However, retail credit card rewards can be limiting, and retail card interest rates can be higher than you expect. Before you apply for a store credit card, take some time to read the fine print and understand exactly what you’re getting into — and make sure you have at least one credit card you can use no matter where you shop.
*Issuer-required disclosure
Information about the Capital One Walmart Rewards® Mastercard® has been collected independently by Bankrate and has not been reviewed or approved by the issuer.
