4 Benefits and 4 Downsides of Store Credit Cards

When checking out at department stores this holiday season, you can expect to receive a smile and a sales pitch. Store credit cards are moneymakers for businesses, and clerks are likely to dangle a nice discount in front of you in the hope that you’ll apply.

The discounts offered 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 reasons to obtain a store credit card.

  • Discounts: Not only do you typically receive an initial 10% to 20% discount on a purchase when you sign up, but you also may be in line for 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 store cards are affiliated with one of the major credit card companies. That means your department store card also can be used for purchases elsewhere. 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 0% 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 is a look at some negatives attached to these accounts.

  • High interest rates: By far, the biggest negative associated with a store credit card is the interest rate. A 2019 CreditCards.com survey found the average APR on America’s biggest retail-branded credit cards has increased to a hefty 27.52%. And remember that 0% 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. 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 low spending limit.
  • 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 as well. 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, they’ll convince you to come to their store and blow your budget once you see all the great things they have for sale.

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 there’s a store you shop at regularly and a card gets you an extra discount, it may make sense. Just 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 “card member only” sale.
  2. Pay off your balance each month.

Still, you might want to check out the other credit cards on the market to find one that offers better rewards with a lower interest rate. Stop by our Solutions Center and compare the best credit cards for travel rewards, interest rates, small business, cash back and more 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 comments below or on our Facebook page.

Kari Huus contributed to this post.

How to find cheaper car insurance in minutes

Getting a better deal on car insurance doesn't have to be hard. You can have The Zebra, an insurance comparison site compare quotes in just a few minutes and find you the best rates. Consumers save an average of $368 per year, according to the site, so if you're ready to secure your new rate, get started now.

Read Next
12 Products to Keep Your Car Clean and Organized
12 Products to Keep Your Car Clean and Organized

These items will help put your vehicular mess to rest — and each is available for less than $20 on Amazon.

Don’t Toss These 7 Household Items — Sell Them
Don’t Toss These 7 Household Items — Sell Them

Here’s how to earn cash as you give new life to these unwanted items.

The 5 States With the Worst Health Care for Retirees
The 5 States With the Worst Health Care for Retirees

All of these states are located in the same region of the nation.

6 Reasons Hiding Cash at Home Is a Terrible Idea
6 Reasons Hiding Cash at Home Is a Terrible Idea

Stashing cash around the house is anything but harmless.

60% of People With This Disease Don’t Know They Have It
60% of People With This Disease Don’t Know They Have It

Millions of people overlook this potentially potent condition that tends to strike women and older adults.

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Most Popular
This Gas Station Scam Is Victimizing More Drivers
This Gas Station Scam Is Victimizing More Drivers

For the second straight year, a growing number of Americans believe they’ve fallen prey to this scam.

7 Ways to Boost Your Credit Score Fast
7 Ways to Boost Your Credit Score Fast

Your financial security might soon depend upon the strength of your credit score.

7 Unusual Ways to Declutter Your Home
7 Unusual Ways to Declutter Your Home

Tired of possessions weighing you down? Here are seven ways to declutter painlessly and effectively.

This Is the Most Popular Age for Claiming Social Security
This Is the Most Popular Age for Claiming Social Security

Both men and women are most likely to start receiving Social Security benefits at this age.

21 Things You Should Always Buy at a Dollar Store
21 Things You Should Always Buy at a Dollar Store

Dollar stores have great bargains on both everyday and occasional purchases.

6 Things You Should Never Buy at Trader Joe’s
6 Things You Should Never Buy at Trader Joe’s

We love Trader Joe’s for plenty of reasons. But think twice about this handful of products.

Could You Give Up These 7 Expenses to Save Thousands of Dollars a Year?
Could You Give Up These 7 Expenses to Save Thousands of Dollars a Year?

You could save more than $30,000 by setting aside these costly expenses for just one year.

6 Legal Documents Retirees Need — but Don’t Have
6 Legal Documents Retirees Need — but Don’t Have

Few retirees have these documents that are crucial to their golden years — especially during a pandemic.

19 High-Paying Jobs You Can Get With a 2-Year Degree
19 High-Paying Jobs You Can Get With a 2-Year Degree

These jobs pay more than the typical job in the U.S. — and no bachelor’s degree is required.

Eat This Food If You Want to Avoid Alzheimer’s Disease
Eat This Food If You Want to Avoid Alzheimer’s Disease

One type of food associated with the Mediterranean diet offers especially large benefits.

5 Awesome Places You Can Retire Overseas on $2,000 a Month or Less
5 Awesome Places You Can Retire Overseas on $2,000 a Month or Less

In this week’s podcast: tips on retiring overseas — from someone who’s been helping American expats for decades.

11 Expenses That Quietly Drain Your Wallet
11 Expenses That Quietly Drain Your Wallet

It’s scandalously easy to overspend in these areas of your life.

9 Dumb Ways You Are Ruining Your Home Value
9 Dumb Ways You Are Ruining Your Home Value

Homeowners, beware these mistakes that can drive away potential buyers.

18 Amazon Purchases That We Are Loving Right Now
18 Amazon Purchases That We Are Loving Right Now

These practical products make everyday life a little easier.

7 Tips for Building an Emergency Stockpile
7 Tips for Building an Emergency Stockpile

A pandemic or natural disaster could leave you reliant on your existing food supply. Is your pantry prepared?

3 Ways to Get Microsoft Office for Free
3 Ways to Get Microsoft Office for Free

With a little ingenuity, you can cut Office costs to zero.

15 Outrageously Overpriced Products — and How to Save on Them
15 Outrageously Overpriced Products — and How to Save on Them

Retailers mark up products by hundreds of times their cost — but you don’t have to pay the premium.

Why Half of Retirees Now Owe Taxes on Social Security
Why Half of Retirees Now Owe Taxes on Social Security

Growing numbers of seniors are paying taxes on their Social Security benefits, but you might be able to avoid this fate.

10 Deep Discounts Available on Amazon This Friday
10 Deep Discounts Available on Amazon This Friday

These items are all steeply discounted — but the deals won’t last long.

View More Articles

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Add a Comment

Our Policy: We welcome relevant and respectful comments in order to foster healthy and informative discussions. All other comments may be removed. Comments with links are automatically held for moderation.