8 Pros and Cons of Store Credit Cards

Store cards often get a bad rap, but don’t miss these benefits.

Whether you want the extra discount at your favorite retailer’s checkout lane or are offered bonus rewards for opening a store credit card account online, a new line of credit is a temptation few can pass up. You can take advantage of cardholder benefits, but avid shoppers should be aware of the disadvantages of having that new account. Check out the pros and cons of online store and department store credit cards so you can fully understand the benefits of these credit cards — as well as their drawbacks.

Store Credit Card Advantages

Getting a store credit card can help you take home those must-have items today, and maybe even boost your credit score. Here’s a closer look at some of the top benefits of retail store cards:

1. Exclusive Discounts and Freebies

You can’t beat some of the perks and freebies you get for opening a new card — especially if you qualify for an instant discount. Many store cards help you earn reward points or gift cards based on how much you spend, and you might have access to exclusive cardholder discounts and freebies.

See: Best Credit Card Offers, Deals and Bonuses

2. Helps Build Credit

Store credit cards offer revolving lines of credit, so they can help you build your credit history — and rebuild bad credit — if you use your credit card responsibly and don’t get in over your head. You could apply for store cards for bad credit to repair your credit history as long as you keep those accounts in good standing.

3. Interest-Free Financing

Some retailers offer interest-free financing for new cardholders, which makes larger purchases more budget-friendly if you pay off the balance during the promotional period. Many stores offer financing plans with no interest on balances paid in full within six, 12, 18 or 24 months. Plus, you can still get cardholder discounts and freebies.

Related: 5 Ways to Pay Your Macy’s Credit Card

4. Easier to Get Approved

A store credit card might be your best option if you have bad credit. Many retail store cards have easier credit requirements than regular cards do, so you have a better chance of getting approved.

RelatedEasiest Credit Cards to Get

Store Credit Card Disadvantages

Opening a new credit card account on a whim might pay off in the short-term. But keep in mind the following store card disadvantages to avoid some of the pitfalls:

1. Hard Inquiry on Your Credit Report

When you apply for a store credit card, the company runs a credit check, which means the credit bureaus will be notified that you’re trying to open a new credit line. This is known as a “hard inquiry,” and it will be posted to your credit report. The typical consumer loses up to five points off his FICO score just for submitting that application. If you already have a low credit score, applying for a new credit card might not be a wise financial move.

2. Might Lower Your Credit Score

Applying for — and using — a store credit card could work against you. Credit bureaus calculate your credit utilization ratio, which is the amount of credit you have available compared to your total debt, to determine your creditworthiness. Using a high percentage of your available credit will impact this ratio and could lower your credit score.

3. High Interest Rates

Retail credit cards charge some of the highest interest rates. Carrying a large balance for an extended period could result in you paying a much higher price for those purchases — even if you buy them on sale. Cardholders who don’t pay their entire balance every month typically end up paying an extra 25 percent or more just in interest charges, according to Debt.org. Be aware of the interest rates on your store cards, and pay the balances each month to avoid paying excessive interest.

4. Costly Late Payment Fees

It’s all too easy to miss that first payment due date when you open a new store credit card account. Losing track of your billing cycle can result in a late fee, and you might lose any promotional rates offered when you got the card. Target, for example, charges a $27 late payment fee the first time you pay late, and then increases the late fee to $38 until you pay on time for six months.

Never Be Late Again: Monthly Bills You Should Always Put on Autopay

5 Store Credit Cards to Consider

Look for a store card with an attractive annual percentage rate and valuable perks. Here are five of the best store credit cards to consider:

Amazon Rewards Visa

You can earn rewards for shopping on Amazon.com and redeem rewards to pay for future purchases. There’s no minimum rewards balance requirement to redeem.

  • 15.24 to 23.24% APR, depending on creditworthiness
  • Instantly earn an Amazon gift card upon approval
  • 3 percent cash back on Amazon.com
  • 2 percent cash back at restaurants, gas stations and drugstores
  • 1 percent cash back on all other purchases

Citi Costco Anywhere Visa

A Costco credit card takes your store membership benefits further by earning you cash back on all your purchases. There’s no annual fee with a paid Costco membership, and you can save on everything from gas to online purchases.

  • 0% APR for first seven months, 16.24 percent variable rate after that, based on prime rate
  • 4 percent cash back on eligible gas, including gas at Costco
  • 3 percent cash back on restaurant and eligible travel purchases
  • 2 percent cash back on all other Costco and Costco.com purchases
  • 1 percent cash back on all other purchases
  • Citi Price Rewind benefits
  • Travel and purchase protection

Walmart Mastercard

The Walmart credit card lets you save money on gas and all in-store and online Walmart purchases. You’ll receive rewards as statement credits.

  • Variable 17.90 to 23.90% APR based on account type
  • $25 reward when you open your account and spend $25
  • 3 percent reward on all Walmart.com purchases
  • 2 percent reward on Murphy USA and Walmart gas
  • 1 percent reward at Walmart and anywhere your credit card is accepted

Kohl’s Store Card

Frequent Kohl’s shoppers can get extra discounts with at least 12 special offers every year, plus take 30 percent off their first purchase on the store card.

  • 24.99 percent variable APR
  • 30 percent off first purchase
  • 15 percent discount when card arrives
  • Spend $600 or more to earn Most Valued Customer status and receive at least 18 discounts a year
  • Can be combined with Yes2You Rewards program

Target Credit Card

The Target REDcard credit card takes 5 percent off all your Target purchases in-store and online, plus you qualify for free shipping. You can manage your REDcard transactions entirely online.

  • 23.9 percent variable APR
  • Combine savings with Cartwheel, subscriptions and other discounts
  • 5 percent savings on Starbucks purchases at Target stores
  • Exclusive extras
  • Early access to events

Don’t Miss: 10 Best Savings Account Promotions Available Now

Use Store Credit Cards Wisely

Retail store credit cards can help with building credit and financing bigger purchases without busting your budget. As long as you pay on time and pay more than the minimum payment every month, you won’t be doing much financial damage. But these cards aren’t without drawbacks, so savvy shoppers need to take a closer look at all the store credit card pros and store credit card cons before signing the dotted line.

Click through to learn about which store cards are the best.