Are store credit cards worth it?

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“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 6 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) can be accepted. It has a particular retailer’s logo on it, but it can be used widely.

Some retailers offer both. Amazon.com, for example, has 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 they different from general-purpose cards?

General-purpose cards—sometimes known as bank cards—have the broadest rewards programs. Depending on the card, you might be able to redeem for cash back, travel, gift cards, merchandise or something else.

If you have a store card or a co-branded card, your rewards will probably focus on perks offered by that individual retailer. These tend to focus on cash back, either as statement credits or as funds you can apply to offset future purchases.

Pros of store credit cards

Store cards work best for loyal shoppers. If you love a particular retailer and buy from them all the time, using their credit card may get you better rewards than any other payment method.

Some store cards throw in extra bonuses such as special coupons, free alterations and invitation-only events.

And store cards tend to be among the easiest credit cards to qualify for, making them logical starting points for people looking to establish a credit history from scratch or to rebuild their credit score after a prior misstep.

Cons of store credit cards

If you ever carry a balance, a store card probably isn’t the best choice for you. Store cards charge an average APR of 25.90 percent, according to the aforementioned CreditCards.com study, which was conducted in September 2020. That compares with 23.39 percent for co-branded retail cards and 19.69 percent for general-purpose cards. (For all three card types, CreditCards.com averaged the midpoint of each card’s APR range.) Of course, if you pay your bill in full before it’s due, you can avoid interest.

Be especially wary of deferred interest promotions. Many store cards dangle incentives such as no interest for 12 months. If it’s phrased as a deferred interest offer, that means if you have any remaining balance when the term runs out, you’ll be charged retroactive interest on your average daily balance all the way back to the beginning of the period.

It’s a common—and sneaky—tactic employed by many store cards. When a general-purpose card offers a 0 percent interest promotion, it’s rarely deferred interest. Those typically only charge interest moving forward on whatever is left after the term expires.

It’s important to consider your credit score, too. Each hard inquiry triggered by a credit application trims a few points off your credit score. Too many of these in a short span can make you look like a risky borrower. Store cards often have low credit limits, too, which can lead to a high credit utilization ratio and hurt your credit score.

And remember that store cards are limiting. They can only be used at that particular store or chain of stores.

The best store credit cards

Of course, the best store credit card will obviously depend on your spending patterns, but there are some cards that tend to be popular with some retailers and issuers. 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

  • Rewards rate: 5 percent back at Amazon.com and Whole Foods Market; 2 percent back at restaurants, gas stations and drugstores; 1 percent back on all other purchases
  • Welcome offer: $150 Amazon gift card upon approval
  • Annual fee: $0 ($119 Amazon Prime subscription required)
  • Regular APR: 14.24 percent to 22.24 percent variable

The Amazon Prime Rewards Visa Signature Card may sound restrictive because of the name, but, surprisingly, it’s much more flexible than the name implies. For starters, there’s just a ton of merchandise you can get on Amazon.com. So even if you shop at other stores, you might find that item you want on Amazon.com to earn the 5 percent cash back. Whole Foods purchases also earn 5 percent back.

Then, the rewards apply to other places besides Amazon.com spending: Whole Foods, restaurants, gas station and drugstore purchases are also purchases that can help you earn rewards. All other purchases earn 1 percent back.

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

  • Rewards rate: 4 percent cash back at eligible gas stations, including gas at Costco (for the first $7,000 per year, then 1 percent), 3 percent cash back on restaurant and eligible travel purchases, 2 percent cash back on all Costco and Costco.com purchases and 1 percent cash back on all other purchases
  • Welcome offer: N/A
  • Annual fee: No annual fee with your paid Costco membership ($60)
  • Purchase intro APR: N/A
  • Regular APR: 15.24 percent variable

The Costco Anywhere Visa® Card by Citi offers a great cash back rate on Costo purchases, plus reasonable cash back on dining and eligible travel purchases. There’s no annual fee, but you must be a Costco member to get the card. The only caveat 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.

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

  • Rewards rate: 5 percent cash back at Walmart.com, including pickup and delivery; 2 percent cash back in Walmart stores and fuel stations, at restaurants and on travel; 1 percent cash back everywhere else Mastercard is accepted
  • Welcome offer: Earn 5 percent cash back in Walmart stores for the first 12 months when you use your Capital One Walmart Rewards Card with Walmart Pay
  • Annual fee: $0
  • Regular APR: 17.99 percent to 26.99 percent variable

The Capital One Walmart Rewards Mastercard is ideal for frequent Walmart shoppers. Rewards mainly apply to Walmart.com, but the welcome bonus applies to in-store purchases with Walmart Pay. After that, you’ll still get 2 percent back on in-store purchases.

This card is especially useful if you buy groceries from Walmart often. If your other rewards cards exclude Walmart from its supermarket category, the Walmart Rewards Mastercard will still deliver rewards on grocery spending at the retailer.

Target REDcard: Best for Target shopping

  • Rewards rate: Receive 5 percent off all purchases made in Target stores or on Target.com
  • Welcome offer: N/A
  • Annual fee: No annual fee
  • Regular APR: 22.90 percent variable

The 5 percent you receive back from shopping with your Target REDcard is applied as a discount on your Target purchases. 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.

Other store cards to consider

There are hundreds of store cards to consider, depending on your shopping habits. Here are just a few more to research:

  • Banana Republic Visa® Card
  • Lowe’s Advantage Card
  • TJX Rewards® Platinum Mastercard®
  • Macy’s Credit Card
  • Ann Taylor’s ALL Rewards Credit Card
  • Wayfair
  • Best Buy

Why you might consider a general-purpose card instead

You definitely shouldn’t go all-in with store credit cards. It’s important to have at least one credit card that can be used broadly. Credit cards offer many advantages over debit cards and cash, including superior rewards programs, fraud protection, no foreign transaction fees, extended warranty coverage and purchase protection.

A store credit card can be a good deal if you spend a lot with that particular retailer, but since it often can’t be used elsewhere, you should supplement with at least one general-purpose or co-branded card. Plus, retail cards tend to have especially high interest rates.

All information about the Amazon Prime Rewards Visa Signature Card and TargetRED Card has been collected independently by Bankrate.com and has not been reviewed or approved by the issuer.

Written by
Aja McClanahan
Personal Finance Writer
Aja McClanahan is an author, blogger and speaker on personal finance and entrepreneurship. Aja is the author of "How a Mother Should Talk About Money with Her Daughter."
Edited by
Senior Editor, Credit Card Product News