What It Means
A store credit card, also called a retail card, is a credit card offered by a retailer or brand, usually at checkout. Experian describes two kinds: a closed-loop card works only at that store or its family of stores, while an open-loop card is co-branded with a network such as Visa or Mastercard and works anywhere that network is accepted. Store cards often come with a discount on the first purchase, special financing or store rewards, and they typically charge higher interestInterest rateThe yearly percentage a lender charges for borrowing money, not counting fees; the APR adds certain fees to show a fuller cost. See more than general purpose cards and may come with lower limits.
Try It: Sign-Up Discount vs. Carrying the Balance
Example numbers to start. The interest is a rough estimate with equal monthly payments.
4505039.38The discount still covers the interest with room to spare.
Interest eats most of the discount.
The interest costs more than the discount saved.
Paid in full by the first due date, so you keep the whole discount.
How People Say It
- "She offered ten percent off if I opened the card."
- "It's a store card, it only works there."
- "Does this one work anywhere or just here?"
The Breakdown
Worked example. At the register, Sam is offered 1010,000 stepsA popular daily step goal that began as the name of a 1960s Japanese pedometer; later studies find health benefits begin well below it. See more% off a $500 purchase for opening the store's card. The card's APR is 30% (an example rate).
| Plan | Pays | Interest, about | Discount | Comes out ahead by |
|---|---|---|---|---|
| Pays the first statement in full | $450 | $0 | $50 | $50 |
| Spreads it over 6 months | $450 plus interest | $39 | $50 | $11 |
| Spreads it over 12 months | $450 plus interest | $73 | $50 | $23 behind |
What the result means. The discount only pays off when the balance is cleared quickly. Carried for a year at 30%, the interest is larger than the $50 saved. The new card also has a limit, and a small store limit can fill up fast, which raises your credit utilizationCredit utilizationThe share of your available revolving credit you're using, found by dividing your card balances by your credit limits. See more.
Before you say yes at the counter. Ask whether the card works only at that store, what the regular APR is, and whether any "no interest" offer is deferred interest, which can charge interest back to the purchase date.
Good to Know
A CFPB issue spotlight, "The High Cost of Retail Credit Cards," found retail cards cost more than general purpose cards and raised concerns that shoppers aren't always told clearly how deferred interest promotions work when they sign up. The CFPB explains that with "no interest if paid in full" offers, missing the deadline brings interest going back to the purchase date. Opening a card is also an application for credit, so read the terms before you sign, and Experian notes a lower limit can push your utilization up quickly.
FAQ
Are store credit cards bad for your credit?
Not by themselves. Paid on time, a store card adds to your payment historyPayment historyThe record in your credit reports of whether you paid each credit account on time, late or not at all; it's about 35% of a FICO Score. See more like any card, but Experian notes the limits are often low, so a modest balance can mean high utilization.
Can I use a store credit card anywhere?
Only if it's an open-loop card co-branded with a network like Visa or Mastercard. A closed-loop store card works only at that retailer or its family of stores, Experian explains.
Is a store card's sign-up discount worth it?
When you pay the first statement in full, you keep the whole discount. Carried for months at a typical store card rate, the interest can cost more than the discount saved.
Do It in Buhata
Debt Payoff, Budget
With Premium, add the store card to Debt Payoff next to your other cards to see where its balance falls in the payoff order.
Open BuhataRelated Terms and Categories
- Credit utilization
The share of your available revolving credit you're using, found by dividing your card balances by your credit limits.
- Credit card rewards
Cash back, points or miles a credit card pays you on your spending, worth only what the program lets you redeem them for.
- Hard inquiry
A check of your credit report by a lender after you apply for credit; it shows on your report for up to two years and can lower some scores a little.
- 0% APR
A promotional interest rate of zero percent for a set period, during which the promotional balance doesn't grow with interest.
Sources
Experian, "How Do Store Credit Cards Work?"; Experian, "Pros and Cons of Store Credit Cards"; myFICO, "Pros and Cons of Retail Credit Cards"; Consumer Financial Protection Bureau, "Issue Spotlight: The High Cost of Retail Credit Cards"; CFPB, "I got a credit card promising no interest for a purchase if I pay in full within 12 months. How does this work?"
- www.experian.com/blogs/ask-experian/how-do-store-credit-cards-work
- www.experian.com/blogs/ask-experian/pros-and-cons-of-store-credit-cards
- www.myfico.com/credit-education/blog/pros-cons-retail-cards
- www.consumerfinance.gov/data-research/research-reports/issue-spotlight-the-high-cost-of-retail-credit-cards
- www.consumerfinance.gov/ask-cfpb/i-got-a-credit-card-promising-no-interest-for-a-purchase-if-i-pay-in-full-within-12-months-how-does-this-work-en-40
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