Are store credit cards worth it?

“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 at a retailer’s checkout counter. More than six in 10 U.S. adults (62 percent) have applied for a retail credit card, according to our sister site CreditCards.com. And about two-thirds of them have done so impulsively at least once.

While savings are always welcome, there can be consequences to opening store credit cards. They’re not always among the best credit cards. When do they make sense, and when should you steer clear?

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. In this case, it may have a particular retailer’s logo on it, but it can be used widely.

Some retailers offer both. Amazon.com, for example, has both a store card and the Amazon Prime Rewards Visa Signature Card. The former only works at Amazon.com, whereas the latter can be used anywhere Visa is accepted.

How are store credit cards different from general-purpose cards?

Broadly speaking, the biggest difference between general-purpose cards — sometimes known as bank cards — and store credit cards is the scope of their rewards programs. With general-purpose cards, you typically have a range of available reward types, such as travel points, cash back rewards, free or discounted merchandise, vouchers and more, depending on the card.

With a store card or a co-branded card, on the other hand, your rewards will likely be limited to the perks offered by the retailer associated with the card. In most cases, that means cash back rewards, credits to offset your statement balance or funds that can be applied towards future transactions.

Pros of store credit cards

• Earn rewards: If you love a particular retailer and buy from them all the time, using their store card may get you better rewards than a general rewards credit card.
• Bonus offers: Some store cards throw in extra bonuses such as special coupons, free alterations 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.

Cons of store credit cards

• High APRs: On average, store cards charge an APR of 26.72 percent, based on data reported in CreditCards.com’s 2022 poll. This means that the costs associated with carrying a balance could easily eclipse the value of any rewards you earn.
• Potentially misleading terms: Be aware that “0 interest” store offers may actually be deferred interest promotions. What this means is that, if you still hold 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 have low credit limits, which can lead to a high credit utilization ratio and hurt your credit score.
• Limited use: While they reward loyalty, store cards can be limiting if you can only use them at that particular store or chain of stores.

The best store credit cards

Of course, the best store credit card for you will depend on your spending patterns. But there are some cards that tend to be universally popular with consumers. Here’s our take on some store cards that you might be interested in, if you decide to go this route:

Amazon Prime Rewards Visa Signature Card*: Best for Amazon.com shopping

The Amazon Prime Rewards Visa Signature Card may sound restrictive, but, surprisingly, it’s much more flexible than its name implies. For starters, there’s a ton of merchandise you can get on Amazon.com or at Whole Foods, where you’ll earn 5 percent cash back. Even if you shop at other stores, you can likely find the items you want at these places instead in order to take advantage of the card’s higher earning rate.

This card’s rewards also apply to places besides Amazon.com and Whole Foods: purchases at restaurants, gas stations and drugstores earn 2 percent cash back, while other general purchases earn 1 percent back.

Costco Anywhere Visa Card by Citi*: Best for Costco shopping

The Costco Anywhere Visa® Card by Citi offers great cash back rates, including 4 percent cash back on eligible gas and EV charging purchases (for the first $7,000 per year, then 1 percent); 3 percent back on restaurant and eligible travel purchases; 2 percent back on all Costco and Costco.com purchases; and 1 percent back on all other purchases.

There’s no annual fee, but you must be a Costco member to get the card. The only caveat here is that your cash back comes every February in the form of a reward certificate. You can redeem it at a Costco store for cash or for merchandise, but some shoppers may find the redemption process cumbersome.

Capital One Walmart Rewards Mastercard*: Best no-annual-fee grocery rewards card

The Capital One Walmart Rewards® Mastercard® is ideal for frequent Walmart shoppers, given its 5 percent cash back at Walmart.com (including pickup and delivery fees).

Though the card’s rewards mainly apply to Walmart.com, it does come with a welcome bonus that applies to in-store purchases with Walmart Pay. After that, you’ll still get 2 percent back on in-store purchases and Walmart fuel stations, as well as on qualified restaurant and travel purchases. The card also pays out 1 percent cash back wherever Mastercard is accepted.

For these reasons, the card is especially useful if you buy groceries from Walmart often — especially if your other rewards cards exclude Walmart from its supermarket category.

Target REDcard*: Best for Target shopping

The 5 percent you receive back from shopping with your Target REDcard is applied as a discount on your Target purchases, either in store or on Target.com. In addition to this discount, you’ll qualify for special benefits like free shipping and a longer grace period for exchanges and returns. As a REDcard holder, you can also qualify for free shipping on most items and an additional 30 days for returns and exchanges.

Are store credit cards worth it?

The short answer is: sometimes. Although store credit cards can be a good deal if you spend a lot with that particular retailer, you may not want to go all-in with them. Since store cards limit your options to a specific store or chain, they’re not a great everyday option. They also tend to have especially high interest rates.

But a store card may still be the right choice for you if you know you can pay your bill in full each month. It also helps if you have at least one other general-purpose or co-branded card to cover other expenses and benefit from credit card perks such as fraud protection, no foreign transaction fees, extended warranty coverage and purchase protection.

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 special rewards for spending you’re likely to do anyway. However, their niche rewards can be limited, so it’s important to understand their specific value and have at least one credit card you can use broadly.

*All information about the Amazon Prime Rewards Visa Signature Card, Costco Anywhere Visa® Card by Citi, Capital One Walmart Rewards® Mastercard® and Target REDcard has been collected independently by Bankrate.com and has not been reviewed or approved by the issuer.