What Are The Pros and Cons of the Best Store Credit Cards?

by Hank Coleman

Pros and Cons of the Best Store Credit CardsYou probably hear it all the time when you’re in the middle of checking out at a major department store: “Would you like to sign up for a store card to get a discount on your first purchase today?” If you’re one of the 56.7% of American credit users who has a store-specific card in your wallet, then something in that simple sales pitch must have worked. But, which are the best store credit cards and what are the pros and cons of the best store credit cards?

Pros and Cons of the Best Store Credit Cards

If you’ve ever been tempted to sign up for a store’s credit card to score that great, last-minute discount on your first purchase and access a variety of other benefits promised by the department store, consider these pros and cons before signing on the dotted line:

Pros – Best Store Credit Cards

Although you can’t use a store credit card outside of that particular store (which includes their website and partners outlined in the credit card agreement), there are some benefits worth mentioning. This is especially true if you’re a consistent customer with that company.

First Purchase Discount

According to CreditCards.com’s 2015 retail card survey, 42 of the top 100 retailers in the U.S. offer some kind of card to their customers. The survey broke this down into types of cards offered: “two debit cards, 38 store-only cards and 24 general purpose (known as co-branded) cards”.numbers skewed because some stores offer multiple types of cards). Although 44 of these cards come with discount or rewards programs, most of these apply to discounts on the first purchase.

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The numbers are a little skewed because some stores offer multiple types of cards. Although 44 of these cards come with discount or rewards programs, most of these apply to discounts on the first purchase.

This first purchase discount can range from 15-40% or more, in rare instances. Stores offer this massive incentive as a way of getting more people to sign up for credit cards.

And, if you’re already a regular customer who’s been looking for a new card to add to your wallet, then this could be a great chance to save a considerable amount of money. Hopefully, your first purchase is big enough to justify it. Otherwise, consider waiting to sign up until your initial discount will be bigger.

Exclusive Cardholder Discounts

Some department stores are savvier than others when it comes to catering to their store cardholder’s wants and needs. The savvy companies don’t want you to be that “one and done” customer who signs up for the card to get the discount then abandons the card in their bottom drawer at home because it doesn’t offer the same great benefits of other rewards cards.

To keep you coming back, many stores offer exclusive cardholder discounts from time to time, which may include monthly coupons, free shipping on all online orders, and secret savings for members only. You won’t be able to take advantage of these money-saving opportunities if you don’t use your credit card. if you were planning on shopping there anyway, then the discounts will probably be better with the retail card itself than one of your general rewards credit cards.

And, if you were planning on shopping there anyway, then the discounts will probably be better with the retail card itself than one of your general rewards credit cards.

According to @lowcards - 56% of Americans have a store-specific credit card. But, are they good?Click To Tweet

Rewards Program Enrollment

Beyond regular discounts and deals offered to cardholders, some companies even offer rewards programs for their cardholders, in which you can earn points on purchases made with your store-specific card. Once you rack up enough points, you can get a sweet discount on your next purchase or even qualify for free stuff.

Consumer Reports outlined some of the best retailer loyalty programs, which offer everything from charitable donations based on a percentage of your purchase, to cash back and store gift cards for racking up a certain number of points within a calendar year.

Cons – Best Store Credit Cards

Despite all the cool benefits mentioned above, there are considerable downsides to signing up for a store-specific card.

Not Always Worth Your While

Unless you’re an avid customer who shops at that store or through their website on a regular basis, then signing up for the store-specific credit card probably isn’t worth it. This may be true no matter how great that initial discount off your first purchase may be. Stores wouldn’t offer their own branded credit cards if there wasn’t something in it for them, and oftentimes, the store is the winner in that equation thanks to

Stores wouldn’t offer their own branded credit cards if there wasn’t something in it for them. And, oftentimes, the store is the winner in that equation thanks to high interest rates and consumer data they get from you, which they can use to improve their marketing strategies. Instead, consider signing up for the co-branded store card (such as store brands’ Visa cards) to get access to a wider variety of outlets where you can use the card.

Instead, consider signing up for the co-branded store card such as store brands’ Visa cards. This will allow you to get access to a wider variety of outlets where you can use the card.

Hard Credit Check

According to Equifax, subprime borrowers (people with credit scores of 660 or lower) carried 7.8 million retail-specific credit cards in 2014, with $6.85 billion in retail-issued card limits. This means that many people with lower credit scores are eagerly diving into new credit card contracts with retail store-specific cards, rather than focusing on raising their credit scores first.

It may not seem like a “real” credit card if you can’t use it beyond that store and its website, but once you apply, a hard credit check will show up on your credit history. This can temporarily ding your credit score.

And, if you sign up for multiple store credit cards, then you might inflict some serious damage on your credit score over the long run. Don’t sign up or even apply unless you’ve done your research and know this is the perfect card for your consumer habits.

Higher APR

Store-specific credit cards come with an average APR of 23.23%, which is a whopping 8% higher than the national average for general credit cards. Since the cards themselves aren’t very versatile – you can only use them in that particular store and website – this seems like a hefty price to pay compared to other rewards programs that let you rack up points and miles wherever you spend.

This high interest rate makes it a lucrative opportunity. Retail cards accounted for $270 billion in sales in 2013 for companies to offer store-specific cards. So, unless you really need a new credit card and you’re a regular customer, avoid these offers to protect your finances.

There are some awesome cardholder perks being advertised out there, but is a store credit card really worth the ding on your credit check and the higher interest rate? These questions are for you to decide.

But, do your research beforehand, rather than impulsively signing up at checkout when the cashier asks, “Would you like to sign up for a store card today to get a discount on your first purchase?”

Do you have store credit cards? What attributes do you like that can be found in the best store credit cards?

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About Hank Coleman

Hank Coleman is the founder of Money Q&A, an Iraq combat veteran, a Dr. Pepper addict, and a self-proclaimed investing junkie. He has written extensively for many nationally known financial websites and publications. Hank holds a Master’s Degree in Finance and a graduate certificate in personal financial planning. Email him directly at Hank[at]MoneyQandA.com.


Hank Coleman has written 582 articles on Money Q&A. Learn more about Money Q&A on Twitter @MoneyQandA and @HankColeman.


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