Are Store Credit Cards Worth It?

Are Store Credit Cards Worth It?

You step up to the cash register to buy your items, and as the cashier rings you up, they ask if you’d like to open a store credit card. You could save 10% off your purchase today if you sign up!

The offer sounds tempting, especially if you’re buying a lot that day. But are store credit cards worth it? Here’s a look at the benefits and drawbacks of getting one. 

What are Store Credit Cards?

Store credit cards can only be used at a certain location or group of retailers. Some stores offer co-branded credit cards with a major credit card provider that you can use anywhere, but those generally have more qualification requirements and aren’t strictly store credit cards. 

Stores use branded credit cards to entice you to buy more at their locations. They may offer rewards for a set number of purchases or provide discounts when you buy a certain amount of merchandise. Store credit cards can impact your credit score even though they have limited usage. 

Drawbacks to Using Store Credit Cards

While getting a credit card at your favorite store sounds fun — just imagine the shopping trips! — there can be negatives to securing a retail credit card. Watch out for these red flags. 

  • High annual percentage rates (APR): The APR is the interest you pay on your purchase, which builds up over time. The longer you take to pay off your credit card, the more interest you’ll accumulate. Store credit cards tend to have higher APRs than general-purpose credit cards, which can wipe out any savings or rewards you may receive with the store credit card. 
  • Deferred interest: Many cards offer zero percent interest on purchases you make within an initial offer period. But read the contract closely. Those terms may reference deferred interest, which means after the initial offer period has expired, you’ll have to pay interest on any unpaid balance accrued since you signed up for the credit card. This interest can add up.
  • Limitations on rewards: You may sign up for a card because of what seems like a great rewards program, but may find the reality is quite different. Reward redemption is often limited to products you buy in the store. You may not have use for such items if the credit card is at a specialty retailer. Or you may have to use the credit card for a purchase to redeem the reward points. There may be additional restrictions, as well, such as items that aren’t eligible for reward redemption, limited dates to use the rewards, or loss of rewards if they’re not spent in a set period of time. 

Reasons to Open a Retail Credit Card

If you decide to get a retail credit card, look for ones that offer you the best deal. Here are a few deals to search for. 

  • Discount offers: Choose store credit cards that provide discounts on items you know you’ll buy. For instance, if an office supply store offers a 15% discount on printer ink when you use your store credit card, opening a credit card may be worth the long-term savings if you can pay off the balance every time you make a charge. 
  • 0% interest: You may get an interest-free offer at the start of your purchase period. Take advantage of this time to buy big-ticket items if you know you can pay them off before the initial offer period expires. 
  • Bonuses for cardholders: Some store credit cards give cardholders small but valuable perks, such as free shipping on online purchases or a free gift on your birthday, such as a complimentary in-store reward. 

Building Credit with Store Credit Cards

One reason many people get store credit cards is to build their credit score. Most store programs have less-stringent qualifications for applicants than a general-purpose card. Depending on the criteria used to determine eligibility, you may be able to get one of these store credit cards if you have little to no credit history or a low credit rating. 

Stores have a motivation to approve higher-risk applicants. They know you like to shop with them, and they set lower credit limits than general-purpose cards. That is why many people use store credit cards to build their credit.

If you recently graduated from college but don’t have any credit cards, qualifying for a general-purpose credit card may be difficult. Getting a store card and making regular, timely payments can help you establish a credit history that could help you secure a general-purpose credit card down the road. 

Someone who has poor credit can use a store credit card to help rebuild their score. Store cards often have smaller credit limits and are less difficult to qualify for. By getting a store credit card, buying a small amount of merchandise, and paying off that balance, you can take the steps to slowly rebuild your credit score. 

Consider the Pros and Cons of a Retail Credit Card

If you plan to make a large purchase at a retailer and you have the means to pay down your balance quickly, then getting a store credit card may be worth it for the significant savings included in a store credit card offer. Just be sure you don’t accrue deferred interest that will build over time and hit you hard at the end of the finance period. 

If you want to build credit, but a store credit card isn’t right for you, you can also look into a secured credit card, which requires you to deposit the limit of the card (typically $500-$2,500) in a special savings account that secures the card. Responsible use of a secured credit card can help you build credit. Another plus is that you can use it anywhere, instead of just at a specific retailer. 

For more insights on saving money and financial decision-making tips, visit our WalletWorks page. 

The content provided in this publication is for informational purposes only. Nothing stated is to be construed as financial or legal advice. Some products not offered by PSECU. PSECU does not endorse any third parties, including, but not limited to, referenced individuals, companies, organizations, products, blogs, or websites. PSECU does not warrant any advice provided by third parties. PSECU does not guarantee the accuracy or completeness of the information provided by third parties. PSECU recommends that you seek the advice of a qualified financial, tax, legal, or other professional if you have questions.