Store credit cards: What are they and should you get one?

While checking out at your favorite clothing store, the cash register attendant offers you 20 percent off if you sign up for its store credit card. It even comes with a 0 percent financing deal for 12 months — what could go wrong?

The fine print, especially for store credit cards, can be deceiving, and you may find your hands full with interest charges and a credit card with various restrictions. Learn what exactly is a store credit card, their benefits and drawbacks and whether it’s worth it for you to apply.

What is a store credit card?

Store credit cards, also known as retail credit cards, are a type of credit card specifically designed for use at a particular store or chain of stores. Retailers partner with banks to issue them, and they often can only be used at that specific retailer or store chain. These are considered closed-loop cards.

Store cards differ from co-branded retail credit cards, which are open-loop cards, still offering rewards for purchases made at its stores, but can also be used anywhere. Note that the interest rates of store credit cards are often higher than those of co-branded credit cards, and the credit limits are typically lower, making it more difficult to maintain a good credit utilization if you’re not careful.

Pros and cons of store credit cards

While store credit cards tend to come with fewer perks than other cards, they can still offer a number of benefits. However, their terms and conditions are trickier than general-purpose credit cards, so you should be aware of the risks before you jump in headfirst.

Pros of store credit cards

• Sign-up discounts: When you sign up for a store credit card, you may get an instant discount on your first purchase. For example, the Macy’s American Express® Card* gives you 20 percent off your purchases in the first two days of account opening, up to $100.
• Regular discounts and coupons: Retail credit cards often come with ongoing discounts, such as 5 percent off all purchases made with the brand, in store and online, usually with some exclusions on partner brands or popular items. Cardholders may also receive exclusive coupons.
• Rewards programs: A store card can earn extra rewards when you use it to make purchases. Many offer bonus points or cash back, redeemable for future purchases at the store.
• Additional benefits: Cardholders often receive additional benefits, including free expedited shipping, extra time to return items, access to exclusive products or sale events and financing offers.
• Opportunities to build credit: To entice shoppers to sign up, retailers make it easier to qualify for store credit cards than most regular credit cards, making store cards a good option for people with bad credit or limited credit history to build their credit score.

Cons of store credit cards

• High interest rates: As previously mentioned, store cards often come with very high purchase APRs. According to data from CreditCards.com, the average APR for retail cards in 2022 is 26.72 percent. That’s high compared to the national average credit card APR at 19.59 percent, at the time of writing. So, if you carry a balance, you’ll end up paying much more than you might have with a regular credit card.
• Low credit limits: Store credit cards generally have much lower credit limits than regular credit cards, making it harder to keep your credit utilization ratio down. This could lower your credit score if your retail card is your only card while building your score.
• Deferred interest promotions: When in-store signs advertise 0 percent financing, they’re usually deferred interest offers. This means that if you don’t completely pay off your purchase at the end of the promotional period, you will have to pay all the interest that would have accrued during the promotional period, starting from the purchase date.

Should you apply for a store credit card?

Before you decide whether to get a store credit card, stop to consider what you hope to get from it. If you’re a big fan of a particular store and can use the ongoing discounts or deals, a store credit card may be the right choice for you.

The main advantage of store credit cards is the rewards you could earn from purchases at the store, then subsequently redeem for more purchases at the store. Overtime, the rewards rate could add up to real savings. This feedback loop is great for regular customers, who know they’ll continue to shop at and visit their favorite store or chain.

As previously mentioned, store cards are great for people looking to build credit since they have lower credit requirements and are easier to qualify for. They can also be worth it if you’re interested in a deferred interest promotion, and you know you can pay off your entire purchase before the intro period ends.

One of the biggest drawbacks to retail cards is their high interest rates. While this doesn’t matter if you pay your balance in full every month, it can really cost you if you carry a balance. In some cases, you may even find that you pay more in interest than the discounted amount.

Alternatives to a store credit card

Even if store cards are up your alley, you might want to consider a few credit card alternatives before you apply. Some general-purpose cards give great rewards on various categories, so you don’t have to be tied to spending at one specific store or brand.

Someone who frequents all kinds of stores and spends in different categories may be a good fit for a rotating category card like the Discover it® Cash Back, which gives 5 percent cash back in quarterly rotating categories (on up to $1,500 in purchases per quarter, then 1 percent). You’ll still earn the same 1 percent cash back on general purchases. And at the end of your first year, Discover will match all the cash back you earned in that year.

For those whose credit score has suffered from a past financial mistake or still need to build up their credit profile, you could go the secured credit card route. Usually offering a low credit line and low credit requirements, you can get a secured card with poor or no credit. They’re also excellent for building credit since the security deposit discourages overspending. Once you improve your credit with a secured card, you can check out better rewards cards.

Nevertheless, you can earn rewards with certain secured cards. For instance, the Discover it® Secured Credit Card gives 2 percent cash back at gas stations and restaurants (on up to $1,000 in combined purchases each quarter, then 1 percent) and unlimited 1 percent cash back on all other purchases. At the end of your first year, Discover will match all your cash back earnings, essentially doubling them. For those on a budget, this no-annual-fee card is an easy choice.

Alternatively, you can use a flexible, flat-rate cash back card like the Capital One QuicksilverOne Cash Rewards Credit Card. You won’t get the same buy-and-save benefits as you would with a store card, but you’ll earn 1.5 percent back on all purchases, both at your favorite stores and everywhere else. Plus, the QuicksilverOne Card is designed for people with fair credit, so it may be the better option if your credit isn’t as strong as you’d like yet.

The best store credit cards

Now that you’re aware of the risks of store cards, there are a few out there that might be worth adding to your wallet if you’re a fan of a particular brand.

Here are our picks for some of the best store credit cards:

TJX Rewards credit card: Best card for TJ Maxx and HomeGoods

Why we picked it: Those who apply and are approved for the TJX Rewards® Credit Card* will enjoy a 10 percent discount on their first purchase. After that, you’ll get 5X points in rewards when shopping at a TJX store, which includes HomeGoods, Homesense, Marshalls, Sierra and T.J. Maxx. You’ll also receive a $10 rewards certificate after you earn 1,000 points. In turn, you can use your rewards certificates the next time you make purchases at a TJX store. Cardholders will also have exclusive shopping invites, though its website does not specify what kind.

Pros

• 5X points on TJX purchases
• Points don’t expire
• Sign-up discount of 10 percent
• No membership or annual fee

Cons

• Rewards certificates expire after 2 years
• High APR at 29.99 percent
• Lacks any financing deal

Who should apply: Regular shoppers of any one of the TJX store brands will find value in this store credit card. Plus, if your credit score is decent, there’s a chance you could qualify for the TJX Rewards® Platinum Mastercard®*, since you cannot pick which one you apply for.

Who should skip: Anyone who doesn’t shop at any TJX brands or lives far away from a store location should skip on applying.

My Best Buy Credit Card: Best for gadget geeks

Why we picked it: The My Best Buy® Credit Card* offers a solid 5 percent cash back on Best Buy purchases, including major brands like Apple, Beats and Thermador, for no annual fee. New cardholders can also earn 10 percent cash back on purchases the first day of membership.

Your rewards are redeemed as $5 reward certificates every time you spend $100 at the store or online. Additionally, cardholders may choose from a selection of limited-time financing offers, one of which offers 18 months of deferred interest on purchases of at least $499.

Pros

• 5 percent cash back on Best Buy purchases
• 10 percent cash back on first day
• Access to various financing options
• No annual fee

Cons

• High APR at 29.99 percent

Who should apply: Best Buy remains the best brick-and-mortar chain to test and buy electronic gadgets and appliances, so shoppers who are particularly fond of electronics, gaming and the like would enjoy the My Best Buy Credit Card. Anyone shopping at Best Buy for once in a blue moon may appreciate the card’s 10 percent discount for new cardholders.

Who should skip: If you don’t need to test and see in-person your electronics, you could skip this card since you can just as easily make purchases at online-only retailers.

Kohl’s Card: Best for loyalty perks

Why we picked it: First and foremost, the Kohl’s Card* gives new cardholders an impressive 35 percent off their first purchase using the card in the first 14 days of approval. Cardholders who are also Kohl’s members earn 7.5 percent cash back on every qualifying purchase. Kohl’s superfans who easily spend $600 or more per year at the store qualify for the Most Valued Customer status, earning bonus coupons and monthly free shipping. Even if you don’t become an MVC, you’ll still have access to occasional exclusive savings and an anniversary offer.

Pros

• Spend $600 a year and receive free shipping every month
• Stack Kohl’s Card discounts with Kohl’s Cash

Cons

• High APR at 28.99 percent
• Card rewards has some exclusions

Who should apply: Parents, who are also Kohl’s loyalists, may appreciate the Kohl’s credit card thanks to the card’s discounts on kids’ clothing and bedding. Because of no annual or membership fee, it’s also good for one-time Kohl’s customers. If you want to make a big purchase, like a five-piece dining set, you can take advantage of its first-time 35 percent discount.

Who should skip: Premium athletic wear, Sephora at Kohl’s products, premium electronics, Calvin Klein, Crocs and more have some exclusionary policies. If you were hoping to apply for the card to use a coupon and earn rewards on an excluded item, you should specify with a Kohl’s employee or skip this card.

Lowe’s Advantage Card: Best for regular discounts at Lowe’s

Why we picked it: The Lowe’s Advantage Card* gives decent discounts to regular DIY-ers, starting with a 20 percent discount on your first purchase when you’re approved (with a maximum discount of $100). After that, the card will give 5 percent off on every purchase you make at Lowe’s, in store and online.

You may also enjoy six months of deferred interest on purchases of $299 or more. Alternatively, you could split your purchase of $2,000 or more in 84 fixed monthly payments, with a low interest rate of 7.99 percent.

Pros

• No annual fee
• 5 percent off on Lowe’s purchases
• 20 percent off sign-up discount ($100 maximum discount)

Cons

• Must spend at least $299 for purchases to be eligible for six-month financing offer

Who should apply: If you love to work on projects around the house, tinkering with this and building that, then the Lowe’s Advantage Card may be a good idea. The new cardholder discount and financing options will also come in handy for infrequent Lowe’s customers buying large appliances or patio sets.

Who should skip: Cardholders who’d prefer to hire a professional to fix their sink or build them a custom shelf will find it difficult to take advantage of this card.

Bottom line

A store credit card can be a good fit for brand loyalists who know they’ll shop at that store or brand in the future. It can also offer an opportunity to save on a big purchase, particularly if the card offers a sign-up discount.

Store credit cards can be a good option for consumers looking to build credit, since they usually have lower credit requirements. They can also be worth it if you’re considering a 0 percent APR promotion and have a plan to pay off what you buy. If you avoid carrying a balance, owning a store credit card can be a smart move.

*Information about the Kohl’s Card, Lowe’s Advantage Card, Macy’s American Express Card, My Best Buy Credit Card, TJX Rewards Credit Card and TJX Rewards Platinum Mastercard has been collected independently by CreditCards.com. The issuer did not provide the details, nor is it responsible for their accuracy.