
The Good and Bad of Store Credit Cards
If you’ve ever been to a department store or chain retailer, the salesperson probably asked you if you wanted to open a store credit card, which is like a normal credit card except that, in most cases, you can only use it at participating stores and businesses. Some of the biggest chain outlets and retailers, such as Target, Home Depot, Walmart, Macy’s and other clothing retailers offer this option. But how do these cards work? And can they actually help you save money? Let’s find out.

LESSON CONTENTS
How Do Store Credit Cards Work?
A store credit card is a card that can often only be used at specified (usually branded) locations. The card is typically designed to help frequent and loyal shoppers earn cash back, rewards or discounts every time they make a purchase with that retailer, either online or in-person. Just like other credit cards, you will get a monthly statement and bill outlining your purchases. You will need to pay off the monthly balance in full every month to avoid paying interest.
Compared to other credit cards, store cards tend to come with high interest rates, typically 15%-25%. Even with a reward or discount, the interest rate can be prohibitive for some people. If the rate is too high, you might be better off finding a credit card with a lower interest rate instead, even if it doesn’t come with rewards. Store credit cards also come with lower spending limits compared to traditional cards. Use this credit card calculator to see what your options are for paying off credit card debt.
There are several different types of store credit cards, including closed-loop or open-loop cards. Closed-loop cards must be used at that specific store or chain of stores. For example, the Target Red card can only be used at Target, but you’re free to shop at any location in the U.S. Open-loop cards can be used at a variety of participating stores and brands, such as those from Visa or Mastercard. This opens up the card to dozens of popular and recognizable stores and brands, such as grocery stores, restaurants and movie theaters.
It usually only takes a few minutes to apply for a store credit card. In most cases, the store will want to look at your credit score before issuing you a card. They will assign you an interest rate based on your credit history and financial situation. The better your score, the lower the interest rate usually is.
Instant issue store credit cards are handed out on the spot, which means the retailer probably isn’t looking at your credit score. These cards usually come with steep interest rates, so use caution if the retailer is ready to hand you a card without first checking your credit score. Other cards offer what’s known as deferred interest, which means you don’t have to worry about paying interest for the first few months. This gives you more time to make your first payment, but these kinds of cards usually come with high interest rates. Be sure to pay off the remaining balance in full before the interest kicks in.
Things to Consider Before Signing Up for a Store Credit Card
How Often Will You Use It?
One of the first things to consider is how much you will actually use the card. Think about how much you normally spend at the store to see if the card is worth your time. If you continue to spend money like normal, see if you will qualify for the rewards.
If you’re thinking about spending more money at the store to rack up points or discounts on the card, make sure you’re not spending more than necessary. It may be tempting to shop exclusively at stores where you can earn rewards and points, but if it may not be worth it if the cost of the item is higher than competitors or other stores.
Is It Worth It?
Lots of store credit cards will give you a steep discount on your first purchase. For example, signing up for a card can help you save as much as 15% or 20% off everything in your cart. Sounds pretty great, right? This can be a great way to save money on large, one-time purchases, such as a new flatscreen TV, home appliance or that leather jacket you’ve had your eye on. However, you need to make sure you can pay off the item in full as soon as your first bill arrives, or you’ll have to pay interest, which may counteract the discount. If you’ve been thinking about making a large purchase on credit to spread out your payments over several months, a store credit card can help you save money upfront. Again, compare the interest rate on the store credit card to a traditional credit card or personal line of credit to make sure you’re getting the best bang for your buck.
Building Credit
If you want to build your credit score, store credit cards aren’t usually the best way to go.
The best way to build up credit is to start using a low-interest credit card and keep your balance as low as possible. Paying off your balance on time will show that you are responsible with your money. You also need to confirm with the card issuer that these payments will be reported to the credit bureau, so they count towards your score.
There are only certain situations where it makes financial sense to use a store credit card. When it comes to everyday spending, most of the time it’s better to get a card with a low interest rate from a reputable financial institution. You should avoid using the card more than necessary. If you’re a frequent shopper that’s loyal to a certain brand, signing up for a card can be beneficial. When it comes to nonessential purchases like clothes, drinks and entertainment, always remember to spend within your means. To get the most out of your credit card rewards be sure to do your research and always read the terms and conditions so you can weigh the benefits of the rewards compared to fees, interest rates and other costs.
Related Resources
View All
Have Home Equity? Cash-Out Refinances versus Home Equity Loans
If you’ve been in your home for several years or more, chances are you have what is known as home equity, which means you’ve paid off a substantial part of your mortgage loan. You can turn your home equity into cash with a cash-out refinance or a home equity loan. Refinancing your mortgage may also allow you to lock in a lower interest rate, helping you save money in the years to come.

How to Get the Best Mortgage Rates
For homeowners, a common financial goal is to pay off the mortgage as soon as possible and avoid paying extra interest. The lower the interest rates, the less you will owe down the line. That’s why it’s important to find a loan with the lowest possible interest rates, usually represented as annual percentage rate (APR), and other fees associated with the lending process. Use this guide to help you find the best mortgage rates to save money over time.

How Much Equity Do I Need for a Home Equity Loan?
One upside to owning a home is that you can start building equity. Once you pay off a certain percentage of your mortgage, you can use this equity to borrow money against your property by taking out what’s known as a home equity loan. This money is often used by homeowners to make repairs, pay down debt or invest in their education. If you are interested in borrowing against the equity you’ve built up in your home, learn more about how these loans work and how to qualify.

Student Loan Forbearance
Student loan forbearance is a period in which you aren’t required to make a payment on your student loans. You can temporarily make a smaller payment, but the principal amount of the loan will continue to accrue interest. Forbearance can help you reduce your monthly expenses in the short term, however, you won’t make any progress in terms of paying off the loan or loan forgiveness. Learn more about student loan forbearance and when to consider this option.

Credit Card Debt and Your Health
Carrying high credit card debt month to month can have a negative impact on your finances. Credit cards have some of the highest interest rates on the market today, making it more difficult to get out of debt. Carrying around credit card debt can also negatively affect your health. This kind of debt can lead to increased stress and anxiety. If you have credit card debt, learn more about how it can affect your health and what you can do to pay it off.

Difference Between Secured and Unsecured Loan
If you’re in the market for a consumer loan, you may have the option of choosing between what’s known as a secured loan and an unsecured loan. Both types of loans will give you access to funds that you will need to pay back at a later date, but they come with clear differences that every borrower should be aware of. Learn more about the difference between secured and unsecured loans so that you can find the right type of loan for your needs.

Spring Cleaning with the Help of a Home Equity Line of Credit (HELOC)
Spring is right around the corner, and that means it’s time to get your home in shape. Spring cleaning is a time for cleaning, organizing and improving your living space. From adding a new deck to renovating your kitchen, there are so many projects to consider. However, spring cleaning home improvements can be costly. Depending on the size and scope of your project, you might need to borrow money. You can use a HELOC to help finance your spring cleaning plans. Learn more about how to use a HELOC to improve your home.

What are Home Equity Lines of Credit (HELOC) and Home Equity Loans?
If you are new to the world of Home Equity Loans and HELOCs, learn how these loans work and how you may be able to use them to your advantage.

Paying Off Holiday Loans
Now that the holidays are over, many Americans are winding down from the celebrations and family time that come this time of year. The extra shopping, eating and travel are fun, but can take a toll on your finances. It’s now time to get back on track. From credit card bills to paying off your holiday loans, use these tips to get out of debt as soon as possible.

The Good and Bad of Store Credit Cards
If you’ve ever been to a department store or chain retailer, the salesperson probably asked you if you wanted to open a store credit card, which is like a normal credit card except that, in most cases, you can only use it at participating stores and businesses. Some of the biggest chain outlets and retailers, such as Target, Home Depot, Walmart, Macy’s and other clothing retailers offer this option. But how do these cards work? And can they actually help you save money? Let’s find out.

How to Get the Most Out of Your Rewards Credit Card
Rewards credit cards may sound like free money, but that’s not always the case. Credit card companies typically use rewards programs to attract consumers that like to travel, rack up points or burn through gallons of gas on long road trips. If you sign up for one of these cards, you may be able to earn a free flight, cash back rewards or discounts on gas, groceries and other everyday purchases. Whatever the reward may be, there are a few things you should keep in mind when using these cards. Learn how to make the most of your rewards program without spending more than you need to.

Holiday Loans: When to Use Them for Holiday Spending
It’s probably no surprise that the holidays tend to be one of the most expensive times of the year. Between holiday shopping, gift-giving and traveling, the holidays can be hard on your bank account. If you’re looking for a temporary way to increase your spending power this holiday season, you might consider using your credit card or applying for a personal loan. Both options can help you cover seasonal expenses, but they come with pros and cons that can have lasting impact on your finances.