“Do you want to save 15% on today’s purchase by opening our in-store credit card?” We’ve all probably heard countless versions of this speech at a retailer’s checkout. More … than 6 in 10 U.S. adults (62%) have applied for a retail credit card, according to our partner site CreditCards.com. And about two-thirds of them have done so at least once on impulse.
While savings are always welcome, opening store credit cards can have consequences. They are not always among the best credit cards. When do they make sense and when should they be avoided?
What is an in-store credit card?
Retailers offer two types of credit cards: store credit cards and co-branded credit cards. Store credit cards, sometimes referred to as 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 bears the logo of a particular retailer, 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 on Amazon.com, while the latter can be used anywhere Visa is accepted.
How are they different from general purpose cards?
General purpose cards, sometimes called bank cards, offer the broadest rewards programs. Depending on the card, you may be able to redeem it for cash back, travel, gift cards, merchandise, or something else.
If you have a store card or a co-branded card, your rewards will likely focus on the perks offered by that individual retailer. These tend to focus on cash back rewards, either in the form of statement credits or in the form of funds that you can apply to offset future purchases.
Benefits of in-store credit cards
Store cards work best for loyal shoppers. If you love a particular retailer and shop from them all the time, using their credit card can earn you better rewards than any other payment method.
Some store cards offer additional bonuses such as special coupons, free changes, and invite-only events.
And store cards tend to be some of the easiest credit cards to qualify for, making them logical starting points for people looking to build a credit history from scratch or rebuild their credit score. credit after a previous misstep.
Disadvantages of store credit cards
If you already have a balance, a store card is probably not the best choice for you. Store cards charge an average APR of 25.90%, according to the aforementioned CreditCards.com study, which was conducted in September 2020. This compares to 23.39% for co-branded retail cards and 19.69. % 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 is due, you can avoid interest.
Be especially wary of deferred interest promotions. Many store cards hang inducements such as no interest for 12 months. If this is a deferred interest offer, it means that if you have a balance left at the end of the term, you will be charged retroactive interest on your average daily balance until the start of the period. .
This is a common and underhanded tactic employed by many store cards. When a general purpose card offers a 0 percent interest promotion, it is rarely deferred interest. These typically only charge interest on what is left over after the term expires.
It is also important to consider your credit score. Every serious request triggered by a credit application reduces your credit score by a few points. Too many of them in a short period of time can make you look like a risky borrower. Store cards also often have low credit limits, which can lead to a high credit usage rate and hurt your credit score.
And remember that store cards are limiting. They can only be used in 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 habits, but some cards tend to be popular with certain retailers and issuers. Here’s our take on some store cards that might interest you if you decide to go this route:
Visa Signature Amazon Prime Rewards card: ideal for purchases on Amazon.com
- Reward rate: 5% return on Amazon.com and Whole Foods Market; 2 percent return at restaurants, gas stations and drugstores; 1% discount on all other purchases
- Welcome offer: $ 150 Amazon gift card after approval
- Annual subscription : $ 0 (Amazon Prime membership of $ 119 required)
- Regular APR: Variable from 14.24% to 22.24%
The Amazon Prime Rewards Visa Signature card may seem restrictive because of the name, but, surprisingly, it is much more flexible than the name suggests. 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 the item you want on Amazon.com to earn the 5% Cash Back. Whole Foods purchases also bring in 5%.
Then the rewards apply to places other than spending on Amazon.com: Whole food, restaurant, gas station, and drugstore purchases are also purchases that can help you earn rewards. All other purchases are refunded 1%.
Citi Costco Anywhere Visa® Card: Great for Costco Purchases
- Reward rate: 4% cash back at qualifying gas stations, including gasoline at Costco (for the first $ 7,000 per year, then 1%), 3% cash back on qualifying restaurant purchases and travel , 2% cash back on all Costco and Costco.com purchases 1% cash back on all other purchases
- Welcome offer: N / A
- Annual subscription : No annual fee with your paid Costco membership ($ 60)
- APR purchase intro: N / A
- Regular APR: 15.24% variable
The Citi Costco Anywhere Visa® card offers an excellent cash back rate on Costo purchases, as well as reasonable cash back on qualifying meals and travel purchases. There is 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 merchandise.
Capital One Walmart Rewards® Mastercard® Review: Best No Annual Fee Grocery Rewards Card
- Reward rate: 5% Cash Back at Walmart.com including pickup and delivery; 2% Cash Back at Walmart stores and gas stations, in restaurants and while traveling; 1% cash back everywhere else Mastercard accepted
- Welcome offer: Earn 5% Cash Back at Walmart stores for the first 12 months when you use your Capital One Walmart Rewards card with Walmart Pay
- Annual subscription : $ 0
- Regular APR: Variable from 17.99% to 26.99%
The Capital One Walmart Rewards Mastercard is ideal for frequent Walmart shoppers. The rewards apply primarily to Walmart.com, but the welcome bonus applies to in-store purchases with Walmart Pay. After that, you will still get 2% cashback on in-store purchases.
This card is especially useful if you often buy groceries at Walmart. If your other reward cards exclude Walmart from its supermarket category, the Walmart Rewards Mastercard will still offer rewards on grocery spending at the retailer.
Target REDcard: Ideal for targeted purchases
- Reward rate: Receive 5% off all purchases made at Target stores or on Target.com
- Welcome offer: N / A
- Annual subscription : No annual fee
- Regular APR: variable 22.90 percent
The 5 percent you receive back from your purchases with your Target REDcard is applied as a rebate on your Target purchases. In addition to this discount, you will receive special benefits such as free shipping and a longer grace period for exchanges and returns. As a REDcard holder, you can also benefit from 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 buying habits. Here are a few more to look for:
- Banana Republic Visa® Card
- Lowe’s Advantage Card
- TJX Rewards® Platinum Mastercard®
- Macy’s credit card
- Ann Taylor ALL Rewards Credit Card
- Wayfair
- Best buy
Why you might consider a general purpose card instead
You certainly shouldn’t go all-in with store credit cards. It is important to have at least one credit card that can be used widely. Credit cards offer many advantages over debit cards and cash, including superior rewards programs, fraud protection, no offshore transaction fees, extended warranty coverage, and purchase protection. .
An in-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. Additionally, retail cards tend to have particularly high interest rates.
All information on the Amazon Prime Rewards Visa Signature Card and TargetRED Card has been independently collected by Bankrate.com and has not been reviewed or approved by the issuer.
