Should You Open a Store Card This Holiday Season?

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Last updated on September 20th, 2023

The holiday season is upon us. During this period, the allure of store card offers is difficult to overlook. From savings in-store to free shipping, these store card offers have the possibility of saving shoppers serious money. So, should you open a store card this holiday season? The answer may not be so simple. Here’s why you should think twice:

Drawbacks of Store Cards

Despite their appeal at the moment of checkout, store cards tend to come with a number of drawbacks for the unequipped consumer. These negatives include:

Lower Credit Limits

Retail store cards typically feature lower credit limits than other forms of credit cards. Many store cards start successful applicants with credit lines of $1,000 or less, versus regular credit cards which can offer credit limits of $5,000 or more.

The main weak point of a lower credit limit is a higher credit utilization ratio. Credit utilization refers to the percentage of available credit that a cardholder uses. Having a credit utilization rate above 30% can lower a person’s credit score – making retail cards challenging to use successfully.

Higher APR

Store credit cards also have higher interest rates than other types of credit cards. According to the most recent data, the average APR for a retail credit card is currently 25.42%. The average APR for a cash back credit card, on the other hand, is 18.36%.

Higher interest rates make credit cards more expensive when carrying a balance. Because of the high APR with store cards (sometimes rising to up to 30%), it is advisable to never maintain a balance with a store credit card. Even small rollover balances can lead to a false sense of security and thinking that it’s okay to continue using it. Such thinking can eventually cause the card’s balance to snowball into a considerable amount of debt.


Many store credit cards are known as “closed-loop” credit cards. A closed-loop card is a type of credit card that you can only use to make purchases at one retailer. Another term for a closed-loop credit card is a single purpose credit card.

Closed-loop store cards are easily identifiable because they do not feature a payment network on the card itself. Open-loop credit cards (the typical card we often associate with credit cards) feature a payment network’s logo (like Visa, Mastercard, or American Express) on the front or back of the card. You will also know of the card’s payment network in the cardholder agreement that comes with opening an account.

If a store card is closed-loop, that means you will only be able to use it at that store – and nowhere else. While a store-only credit card is great if you make frequent purchases with that merchant, they lack usefulness elsewhere.

Alternatives to Store Cards

Because of the potential negatives that come with a store card, it is usually better to consider alternative credit card options. These choices include:

Cash Back Cards

Cash back credit cards are usually a better option than a store card. These cash back cards allow the cardholder to earn rewards on a broader array of purchases, with select categories earning enhanced rewards in many instances.

The Citi® Double Cash Card – 18 month BT offer is an excellent example of a versatile cash back credit card. All purchases with the Double Cash earn 2% cash back – 1% when making the purchase and another 1% back after paying off the balance on that purchase. There are no limits to the total amount of cash back a cardholder can earn – and most purchases are eligible for the 2% back.

Other cards, like the Upgrade Visa with Cash Rewards, offer a mix of rewards and a low APR. The Upgrade Card offers 1.5% cash back on all eligible purchases, plus a great APR starting in the single digits.

Retail Cards

Not all store cards are created equal. While many store cards are closed-loop, some offer an open-loop alternative. For instance, fans of IKEA can use their IKEA® Visa® Credit Card for purchases at the Swedish home good store – and anywhere in the world where Visa is accepted.

While open-loop retail cards can be used anywhere the payment network is accepted, they are like store cards in that the rewards only apply to the co-branded store. For example, the Belk Rewards Mastercard® allows you to use the card practically anywhere, though you may only redeem your rewards for Belk discounts. Similarly, rewards with the Athleta VisaOld Navy Visa, or the Forever 21 Visa only apply to redemptions with those brands.

Are There Any Benefits of a Store Card?

Closed-loop store cards may have drawbacks, but they do have redeeming qualities. These store cards offer the following benefits for potential applicants:

Lower Credit Score Requirements

Store cards are easier to get than many other credit cards. Store cards usually require a fair credit score. This lower credit score threshold makes them a good option for people new to credit.


Many store cards offer in-store discounts, which are ideal for those who prefer to shop at a specific brand or retailer.

Reward Programs

Despite the lower credit score threshold, store cards offer rewards programs that provide savings and points. These are applicable towards gifts, discounts, free shipping, and other perks throughout the year.

Related Article: Retail Credit Cards: Your Ultimate Guide

Featured photo by Sarah Pflug / Burst
About: Cory
Cory Santos

Cory is's "Jack of all trades" and resident credit expert, covering all facets of the credit card space. Cory holds academic degrees in both the U.S. and U.K. In addition to credit cards, Cory finds that jogging, cats, and memes are essential parts of a balanced day.

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