Are store credit cards worth it?

Store credit cards are worth it for people with fair credit or better who frequently shop at a particular retailer. Most store credit cards are easy to get and don’t charge annual fees, and the best ones offer generous discounts on your first purchase as well as up to 5% back in ongoing rewards at your favorite stores. If you use a store credit card responsibly, which means making your payments on time and not spending too much of your credit limit, it’s easy to make the card worthwhile.

On the other hand, people who typically carry a credit card balance from month to month, or who don’t do a lot of shopping at any one retailer, may not find a store credit card to be a good fit. That’s because there are some pitfalls associated with store credit cards. They typically come with high interest rates and low credit limits, for example, and they’re only accepted at specific stores.

Why Store Credit Cards Are Worth It

Frequent shoppers can take advantage of rewards and discounts.

Many store credit cards offer rewards or discounts for purchases made in-store or on the store’s website. If you frequently shop at that store, these rewards can add up and provide significant savings over time. For example, the Target Credit Card gets you a 5% discount on all Target purchases, while the Kohl's Credit Card offers a 40% discount on your first purchase within 30 days and 7.5% back in rewards on every qualifying purchase made at Kohl's.

Store credit cards usually do not charge an annual fee.

Not having to pay every year for the privilege of owning the card means you don’t have to spend a certain amount just to recoup the cost of the annual fee. You can also keep the account open indefinitely at no cost to build a long credit history.

Store credit cards can be good for building credit.

If you have fair credit, a store credit card can be a way to boost your credit profile, as long as you maintain a history of timely payments and low credit utilization. Keep in mind, however, that opening a new credit card can temporarily lower your credit score due to the hard inquiry when you apply and by reducing the average age of your credit accounts.

You can use WalletHub’s free credit score simulator to see exactly how opening a new credit card could affect your credit score.

You may save money with special financing offers.

If you manage credit responsibly, you may be able to capitalize on a store credit card’s deferred interest plan. This can be useful if you don’t qualify for a regular 0% APR credit card and you need to finance a large purchase, as long as you pay off the balance before the promotional rate expires.

Just be sure to read the fine print and understand the terms and conditions before you enroll. Make sure you don’t have better options as well. If you have good credit or better, you may be able to qualify for a general-purpose credit card that offers a 0% introductory APR without deferred interest.

Why Store Credit Cards Are Not Worth It

Store credit cards come with high interest rates.

With a store credit card, if you carry a balance from month to month, you could end up paying more in interest than you’d save with any rewards or discounts.

On that note, be very careful with store credit cards that have deferred interest. This means you must pay the entire purchase balance before the intro rate expires, or you’ll have to pay all the interest that would have accrued since the purchase date, and at the card’s regular purchase APR. It’s best to avoid deferred interest offers if you have better options, such as a 0% APR card not affiliated with a retailer.

Low credit limits may negatively affect your credit.

If you’re a frequent shopper, using the majority of your credit limit, which will likely be a low amount to start with, will raise your credit utilization, which is an important factor in calculating your credit score. For example, if a store card offers a $300 credit limit and you have a $250 balance, that’s a credit utilization ratio of 83%, which is considered very high. Ideally, you’ll want to maintain a credit utilization ratio of less than 30% of your credit limit.

You’re limited in where you can use a store credit card.

Store credit cards can only be used for purchases at a specific retailer or a group of affiliated stores, so if you prefer to shop at a variety of retailers, you may not get much benefit from a store-only credit card.

Bottom Line

Ultimately, whether a store credit card is worth it depends on your spending preferences and how you manage your account. If you shop frequently at a particular store and can pay off the balance in full each month to avoid interest charges, the rewards and benefits offered by the card should outweigh the potential drawbacks.

However, if you tend to carry a balance or prefer more flexibility in where you shop, you may be better off with a general rewards credit card or a co-branded credit card that allows you to use the card for purchases anywhere the card’s network is accepted.