Decoding Store Credit Cards: Pros and Cons for Shoppers

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Last updated on September 20th, 2023

A good deal on a shopping spree is always a sweet find. With store credit cards, consumers typically are promised savings for shopping at their favorite retail stores, but are they always a good idea? Here are the pros and cons of shopping with a store card.

Pros & Cons of Shopping with Store Credit Cards

Retail credit cards, a.k.a. store credit cards, hold many benefits for people who shop frequently at specific stores. The appeal of store credit cards is usually due to the savings they offer cardholders. However, retail cards may not be for everyone, all the time. Here’s a list that we have put together containing the benefits and disadvantages of store credit cards.

The Pros of Store Credit Cards

Let’s begin our dive into retail credit cards with the benefits and advantages they provide for their cardholders.

Discounts and Rewards

It is no secret that retail credit cards could get you rewards and discounts at your favorite stores – this is part of their allure. The Target RedCard™ Mastercard is a perfect example. If you’re a frequent Target shopper, a discount on a Target run could be ideal. With the Target RedCard, cardholders get an unlimited 5% discount at Target stores and The Target credit card is not the only retail card that gives discounts, though. It is a common feature found in several retail credit cards.

The Target credit card also earns up to 2% in rewards on purchases. This breaks down as 2% on dining and gas purchases and 1% anywhere else Mastercard is accepted. Many other retail cards also offer reward benefits when used to make purchases, like the Sam’s Club® Mastercard®. It earns 5% cash back on gas; 3% cash back at Sam’s Club purchases, dining and take out; and 1% on all other purchases. If you truly frequent the store, stacking up the rewards will come naturally, and in the long run, you can earn additional savings. Moreover, most store cards will offer cardholders exclusive access to sales, cardmember events, and more.

Introductory Discounts

Similar to traditional credit cards, some retail cards have introductory offers usually related to discounted first purchases. In contrast, however, traditional credit cards might earn you bonus cash back for reaching a spending goal on new accounts or introductory low rates. For example, the Sam’s Club® Mastercard® offers new account holders a bonus statement credit after using the card to make a qualifying purchase that meets the spending limit.

Special Financing

If you’re making a high-dollar purchase, special financing can help make your payments manageable, which would otherwise be a large lump sum. Special financing can help manage more expensive purchases, such as home makeovers, repairs, appliances, hobbies, and more. For instance, the Overstock™ Mastercard® offers special financing on eligible purchases. The Overstock Mastercard special financing is offered periodically when they have available promotions. Typically Overstock has two kinds of offers depending on your purchase total amount you can qualify for no-interest promotional periods or low-rate plans for major purchases.

Furniture can cost hundreds of dollars, and if home makeovers are your thing, then a furniture store retail credit card can help finance your purchases. If you’re a homeowner, you may find a home improvement store card is more practical. Big box retailers that you may be familiar with include Lowe’s and The Home Depot – both of which offer retail credit cards with special financing offers.

Build Credit With Retail Credit Cards

Another benefit of having a store credit card is the opportunity to build credit. Retail cards still hold the same credit-building power as traditional credit cards. Therefore, responsible use is crucial to ensure your credit score grows. Otherwise, irresponsible use of a retail credit card can damage your credit score if you often have an unbalanced credit utilization ratio.

Retail credit cards can aid your credit journey even if you have subprime credit or no credit history. Consider merchandise cards like the BOOST Platinum Card or the Unique Platinum Card. Both grant access to an unsecured line of credit and do not require a credit check, so your credit score will not take any temporary hits.

The Cons of Store Credit Cards

There are a few less-than-appealing angles to store credit cards. Many have high interest rates and limited rewards value. Taking it back to our first example, the Target RedCard™ Mastercard earns up to 2% rewards on purchases. However, redeeming the rewards is limited. Cardholders can only redeem rewards for Target gift cards. Here is an overview of other potential downsides to shopping with store credit cards.

Overspending, Fees, and Tempting Offers

We briefly mentioned the potential for overspending in our list of pros. Retail cards for clothing stores, footwear shops, beauty, and others may have smaller credit limits. As such, it can be easy to get carried away on a shopping spree and use your retail card to make several purchases or one large transaction. It gets dicey when you’re dealing with a smaller credit limit. For instance, if you have a $500 credit limit on a card like the Banana Republic Rewards Mastercard® and spend $300 on one shopping trip, you have now used more than 50% of your available credit. As a result, your credit utilization ratio is negatively impacted and may cause a dip in your credit score.

You may also have to consider annual fees. Some retail credit cards have them, and some don’t. You must factor in the annual fee and its worth. Do the rewards cancel out the cost of the annual fee? And will you use the store card often enough to make purchases and benefit from the potential maximum rewards you can earn?

Another downside to retail credit cards is the attractive store credit offers. The next time you catch yourself at the payment counter of a retail store, pay notice to the cashier. Did they offer you a discount for signing up for a store credit card? This scenario is common. For example, the offer may include 20% off your purchase for applying – a tempting proposition. However, you should think about your needs. Do you need another credit card? Can you manage responsibility for the new card if you apply and get approved?

The immediate reward may be a 20% discount, but you should factor in the long-term consequences, like the impact on your credit score, the potential for overspending, and the responsibility of making timely payments to avoid late fees and negative impacts on your credit score and report.

The Bottom Line

Regardless of the potential negatives behind retail credit cards, they have numerous strengths like credit building, discounts, rewards, and more. Depending on your financial needs and spending habits, a store credit card can be a useful shopping tool in your wallet. A crucial question to ask yourself, however, is whether you will frequently use the retail card. If the answer is no, we recommend alternative credit cards or even holding off from a new credit card altogether. There are credit cards for every need. Consider credit cards for bad credit, cash back credit cards, or even business credit cards if you need to cover expenses for your company.

Related Article: The Best Secured Credit Cards

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About: Jeannyn Gomez
Jeannyn Gomez

Jeannyn is the Content Management Assistant for In addition to serving on all aspects of social media and spreading the word on expert credit and personal finance advice, Jeannyn finds herself on quests for humor, supernatural phenomena, and conspiracy theories for fun.

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