The Rewards Are Tempting, But Should You Get a Store Credit Card?


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It seems like an easy way to get an extra 10 to 15 percent off your purchase, but will applying for that store credit card come back to bite you? Here's what you need to know about these alluring offers.

At checkout registers in department stores across the country, you can expect to receive a smile and a sales pitch. Well, at least a sales pitch. Store credit cards are moneymakers for businesses, and you can expect clerks to dangle a nice discount in front of you in the hope you’ll apply.

The discount on store merchandise and other rewards are often tempting — and many of us take the bait — but are store credit cards a good deal?

Pros of store credit cards

Store credit cards aren’t all bad. In fact, they can come with some nice benefits. As we see it, there are four major pros for getting a store credit card.

  • Discounts: Not only do you get an initial 10 percent to 20 percent discount when you sign up, you may also be in line to receive extra discounts all year long. Store credit card holders may be the first to receive special coupons or gain access to exclusive sales events as a reward for their loyalty.
  • Flexibility: Some, but not all, store credit cards are affiliated with one of the major credit card companies. That means your department store card can also be used for purchases elsewhere as a regular Visa, MasterCard or American Express card. As a bonus, depending on the retailer’s program, you may even earn rewards points to be redeemed as future discounts at the store.
  • Credit benefits: If your credit score could use some polishing, a store credit card may be able to help. Consistently using and paying off the card will help establish a pattern of good credit habits that can, in turn, boost your score.
  • Financing options: Finally, some store credit cards can be used to obtain zero percent financing offers. Stores may give you 18 months or more interest-free to pay off a major purchase made with their credit card.

Cons of store credit cards

While there are definitely some nice perks attached to store credit cards, all is not rosy. Here’s a look at some of the negatives attached to these accounts.

  • High interest: By far, the biggest negative associated with store credit cards is their interest rate. A recent CreditCards.com survey showed the average APR on America’s biggest retail-branded credit cards had increased to 23.43 percent, far higher than the average for all credit cards (15 percent). Some have APRs climbing to almost 30 percent. And remember that zero percent financing we discussed? If you don’t pay off your purchase within the allotted time, many store cards go back and apply the interest retroactively. So let’s say you had 18 months to pay off a $2,000 purchase, but you still had a $200 balance at the end of the financing period. The store will then tack on 18 months’ worth of interest to your balance. Yikes!
  • Limited use: Some store cards may offer the same flexibility as a regular credit card, but others can only be used at that particular retailer. In addition, you may have a very low spending limit. Both make it questionable whether the cards are a good deal, particularly when you consider the ding to your credit score that we’re going to talk about next.
  • Credit damage: Your credit score gets dinged slightly every time you have it pulled for a card application, and your score will also suffer if your card balances are too high. The damage can be felt in other ways. When reviewing loan applications, creditors not only consider how much debt you have but also how much existing credit is available to you. If you already have enough credit to go on a $20,000 spending bender, lenders might be hesitant to give you access to more cash.
  • Temptation to spend: Another negative we see with store cards is the temptation to buy more. Stores aren’t giving out cards and coupons to be nice; it’s a strategic business decision. They hope that by giving you a few perks, you’ll come to their store and blow your budget once you see all the great things they have for sale.
  • Better deals elsewhere: As Stacy mentioned in the video, there are credit cards offering sign-up bonuses good for a free plane ticket, a reward that could be a better deal than 15 percent off one day’s purchases. So when you’re offering up your signature, be sure you’re getting as much for it as possible. (Check out: “How to Play the Credit Card Rewards Game, and Win.”)

The bottom line

So back to the original question: Should you apply for a store credit card? In the past, we’ve told you the answer is no.

However, if you there’s a store you shop at regularly and a card gets you an extra discount, it may make sense. But be sure you follow these two rules:

  1. Buy only what you would purchase if you didn’t have the card. No extra trips just because there is a “cardmember only” sale.
  2. Pay off your balance each month.

Still, you might want to check out the other credit cards on the market to see if you can find one that offers better rewards with a lower interest rate. You can get all the details on some of the best deals in our credit card section.

Do you have a store credit card? What made you apply and do you regret the decision? Tell us in the comments below or on our Facebook page.

Kari Huus contributed to this post.

Stacy Johnson

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