How to shop for the perfect retail credit card

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During the busy holiday shopping season, retailers often unveil their most tempting offers of the year for customers looking to open a retail credit card.

But the decision to open a new retail credit card is not one that you should take lightly. Many traditional store credit cards come with high interest rates, hidden fees and restrictions for use that can outweigh any rewards or promotional deals. Recently though, lucrative co-branded cards and widely accessible secured cards have revived the retail credit card market for consumers looking to save money on their regular shopping without as many strings attached.

If you’re considering taking on a new retail credit card this year, here are a few things to consider:

How often do you shop at the store?

In most cases, you should only consider a retail credit card from a store you shop at regularly. You can save money with discounts, shop sales early and earn cash back on products you already buy.

But if you plan on making a large purchase that you’d like to finance or earn cash back on, a retail card even from a store you don’t frequent may still be beneficial. Consider this if you have the option to save on the purchase with promotional pricing or pay it off over time without accruing any extra cost in interest.

Make sure you understand the terms, though. Many retail credit cards that offer “no interest until” a specific date are actually just deferring interest. If you fail to pay off the purchase in full by that time, you’ll be charged the full amount of interest accrued during the deferred period.

And whether you’re making one large purchase or you’re considering a retail card for your favorite store, always budget your spending accordingly.

“Taking advantage of a specific offer might make sense, but if you start revolving because you overspent, you will be sorry in the long run,” says Brian Riley, director of credit advisory service at Mercator Advisory Group.

Could a general rewards card serve the same purpose?

By nature, retail cards are limiting. If you like the idea of earning cash back or points on your shopping but you’re not set on one specific retailer, there may be a general rewards credit card that serves the same purpose as your potential retail card but offers much more flexibility.

The U.S. Bank Cash+™ Visa Signature® Card, for example, offers 5 percent cash back on two categories of your choice each quarter (up to $2,000 in combined purchases in that time) plus 2 percent cash back on your choice of gas stations, restaurants or grocery stores and 1 percent on all other purchases. The 5 percent choice categories include several retail options, including select clothing stores, department stores, sporting goods stores, furniture stores, bookstores and electronics stores.

If you don’t plan on spending more than $2,000 per quarter on these retail categories, you may get broader benefits from a card like this rather than a specific store’s retail card.

Is it open loop or closed loop?

Depending on how you want to use your retail card, considering an open loop co-branded card or a closed loop private label card can make a substantial difference.

An open loop card is one that is co-branded with a network, such as Visa or Mastercard, and may be used anywhere that network is accepted. A closed loop (or private label) card, on the other hand, can only be used on purchases made with the issuing retailer.

Many stores offer both options. For instance, the Amazon Prime Rewards Visa Signature Card, offers its highest rewards on Amazon purchases but may be used anywhere, while the Store Card and Amazon Prime Store Card are both accepted only at, select physical Amazon store locations and merchants who accept Pay with Amazon.

In general, open loop cards are more flexible and often have better long-term rewards potential with ongoing rewards programs, but if you have less-than-stellar credit or are looking for a store card you won’t be tempted to use elsewhere, a closed loop card may serve your needs better.

Is your credit up to par?

Retail cards are often (but not always) easier to qualify for than other credit cards. They can be a great way to build credit if you’re starting with a thin credit profile or you’ve damaged your credit in the past. This is especially true for private label cards.

“Getting a store card is typically easier because the risk is limited to the issuer,” Riley says. “In the private label card, retailers already have a profit built into the purchase price. Charges on the private label card are a financial bonus.”

Riley also points to an emerging trend in private label cards that can help those with limited credit: secured credit cards. Secured retail credit cards can help those who aren’t able to qualify for a regular retail card to build credit and often move to the unsecured version after proving creditworthiness with responsible payments.

No matter which type of retail card you’re applying for, you should be aware of the qualifications the lender is looking for to ensure your chances of acceptance are high before you apply.

What’s the interest rate?

Retail cards are infamous for their sky-high interest rates. According to a recent survey from, the average APR on store-only retail credit cards is 27.52 percent and the average for co-branded store cards is 23.39 percent. That’s a significant jump from the average overall credit card APR, which according to Bankrate’s latest data is just over 17 percent.

No matter what type of card you have, you should pay off your balances each month in order to keep from accumulating these high interest payments. But if you do plan on carrying a balance, make sure you look up the card’s range of variable APRs before applying so you know what you’re getting into.

If you’re using your retail card to make a single large purchase like a new computer or furniture set, look for one with an introductory zero percent interest rate on new purchases that allows you to pay the purchase off over time without taking on interest.

Bottom line: Is a retail card right for you?

Retail cards can be a useful way to jumpstart your credit, but they’re not for everyone. And a retail card probably shouldn’t be the only one in your arsenal; you’ll find greater benefits with a more diversified wallet.

“One strategy that works well in many household budgets is to have multiple cards,” Riley says. He gives the example of a general purpose card to cover everyday spending and easily document what you spend, a second card for emergencies like auto repairs and a third with your favorite retailer to establish “a well-rounded foundation for payment cards.”

And remember to be selective when choosing a card. Choose those with rewards that will benefit you long-term and continue to practice good credit habits along the way.

“Consumers should be cautious about chasing rewards,” Riley says. “A $20 bonus sounds attractive, but if you end up carrying a balance over several months, the benefit will be cannibalized by interest.”