Why It’s Time to Get Rid of Your Store Credit Card

Multicultural young girls shopping and paying with credit card in boutique, fashion shopping girls concept stock photo
LightFieldStudios / iStock.com

This will probably ring familiar to anyone who shops at stores: While paying for your items, the clerk tries to get you to sign up for a store credit card. In almost every case, you’re better off forgoing the store card and using a regular credit card instead.

Even if you already have one or more store credit cards, it’s probably time to get rid of them. The reason is simple: The disadvantages of using a store card easily outweigh the advantages when compared to other cards.

Here’s a quick rundown of why store credit cards don’t match up well with other types of credit cards:

High Interest Rates

Credit cards in general tend to charge high interest rates compared with other loan products, but most store cards are higher than average. For example, the average annual percentage rate (APR) across all credit card accounts in the U.S. was 14.56% during the 2022 first quarter, according to Federal Reserve data. With many store cards, you’ll face an APR of 20% or higher if you don’t pay the balance in full each month. In many cases, you might not get a low-APR introductory offer, either.

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Minimal Rewards

You won’t get a lot of bang for your buck when it comes to store credit cards, as their rewards can’t compare to the rewards you get with other credit cards. Spending a lot of money at a store doesn’t guarantee the rewards will be worth the investment, either. Plus, you are limited to one spending category to earn them – the money you spend at that particular retailer.

Low Credit Limits

If you are used to having a credit limit of several thousand dollars on your regular credit card, then you’ll be disappointed to find that many store credit cards only offer limits of a few hundred dollars. This not only limits the purchases you can make with a store card – it can also ding your credit score because you might find yourself using most of your credit limit.

Minimal Redemption Options

Unlike other credit cards, store credit cards don’t give you many choices when it comes to redeeming your rewards. You basically have to redeem them at the retailer itself.

Limited Use

Many store credit cards are “closed-loop,” meaning they can only be used at one specific retailer or associated brands. That means you can’t use the card for other types of purchases.

Other Credit Card Options

If you’re thinking about ditching your store credit cards, the good news is that most retailers accept non-store cards for purchases (otherwise they’d have a hard time staying in business). Here’s a list of cards that offer decent perks and favorable terms. All features are current as of July 18, 2022.

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With the Chase Freedom Unlimited Card, you can earn an extra 1.5% on everything you buy (on up to $20,000 spent in the first year) which is worth up to $300 cash back. This is in addition to the 5% cash back on earned on travel booked through Chase Ultimate Rewards, 3% back on dining at restaurants and drugstore purchases, and 1.5% back on all other purchases.

There is no annual fee with the card, and cash back rewards do not expire as long as your account is open. There also is no minimum to redeem for cash back. Cardholders can earn $100 cash back for each friend they refer to the Chase Freedom Unlimited Card, as long as the friend qualifies for the card and becomes a member.

You can also earn 5% on travel purchased through Chase Ultimate Rewards; 3% on dining at restaurants, including takeout and eligible delivery services; 3% on drugstore purchases; and 1.5% on all other purchases.

Apply here for the Chase Freedom Unlimited Card

With this card, you can earn 5% cash back on your highest eligible spend category each billing cycle on up to $500 spent each billing cycle, and 1% cash back thereafter. Eligible categories include restaurants, gas stations, grocery stores, select travel services, select transit services, select streaming services, drugstores, home improvement stores, fitness clubs, and live entertainment.

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You also can earn $200 cash back after you spend $1500 on purchases in the first six months of account opening. Points for cash back can be redeemed as a statement credit, direct deposit or check. You can also redeem points in the form of gift cards, travel and Shop with Points at Amazon.com

The Citi Custom Cash Card offers a . Balance transfers must be completed within four months of account opening. The balance transfer fee is either $5 or 5% of the amount of each credit card balance transfer, whichever is greater.

Apply here for the Citi Custom Cash Card

With the Chase Sapphire Preferred card, you get a 60,000-point welcome bonus after spending $4,000 in the first three months after opening. This is a great option if you’re looking for more valuable travel rewards. You can also enjoy benefits like a $50 annual Ultimate Rewards Hotel Credit, 5x on travel purchased through Chase Ultimate Rewards, 3x on dining and 2x on all other travel purchases.

This card has a $95 annual fee, which is very reasonable considering the ongoing perks and rewards offered.

Apply here for the Chase Sapphire Preferred Card

With the Blue Cash Everyday Card, you get a . You can also get reduced plan fees when you split up large purchases into monthly installments with “Plan It by American Express.”

New cardholders can receive $200 back as a welcome offer. You will earn $200 back as a statement credit after you spend $2,000 in purchases on your new Card in the first six months of Card Membership. Other perks include:

  • 3% cash back on groceries at U.S. supermarkets on up to $6,000 per year in purchases. After that, the cash back is 1%.
  • 3% cash back on U.S. online retail purchases on up to $6,000 per year in purchases, and then 1%.
  • 3% cash back on gas at U.S. gas stations on up to $6,000 per year in purchases, and then 1%
  • 1% cash back on other purchases.

Cash back is received in the form of Reward Dollars that can be redeemed as a statement credit.

Learn more about the American Express Blue Cash Everyday Card

All information about American Express card offers have been collected independently by GOBankingRates and have not been reviewed or approved by American Express, Member FDIC. These offers are not available through GOBankingRates.

With this card, you can earn a when you spend $1,000 in purchases during the first three months after opening. You also can earn unlimited 2% cash rewards on purchaseswith no categories to track or quarterly activations.

The card has no annual fee and offers a . Balance transfers made within 120 days from account opening qualify for the intro rate and fee.

With the Wells Fargo Active Cash Card, you can also get up to $600 of cell phone protection against damage or theft when you pay your monthly cell phone bill with the card, subject to a $25 deductible. The card offers advanced security features such as Voice Verification and 2-step Verification at sign-on.

Learn more about the Wells Fargo Active Cash Card

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About the Author

Vance Cariaga is a London-based writer, editor and journalist who previously held staff positions at Investor’s Business Daily, The Charlotte Business Journal and The Charlotte Observer. His work also appeared in Charlotte Magazine, Street & Smith’s Sports Business Journal and Business North Carolina magazine. He holds a B.A. in English from Appalachian State University and studied journalism at the University of South Carolina. His reporting earned awards from the North Carolina Press Association, the Green Eyeshade Awards and AlterNet. In addition to journalism, he has worked in banking, accounting and restaurant management. A native of North Carolina who also writes fiction, Vance’s short story, “Saint Christopher,” placed second in the 2019 Writer’s Digest Short Short Story Competition. Two of his short stories appear in With One Eye on the Cows, an anthology published by Ad Hoc Fiction in 2019. His debut novel, Voodoo Hideaway, was published in 2021 by Atmosphere Press.
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