store credit cardIf you don’t already have a store credit card, you’ve probably been tempted to apply for one at some point. The perks they offer combined with the instant discounts they sometimes provide seem useful, and credit cards are helpful financial tools, so why not pick one up? Before you sign up for a card at your favorite retailer, though, it’s important to understand that there are key differences between store cards and traditional credit cards, and that those handy benefits can come with some serious limitations. Read on as we break down the strengths and weaknesses of store credit cards to help you determine if they’re worth opening.

Store credit cards accept consumers with lower credit scores

Stores want all kinds of customers to sign up for their cards and use them to shop, so many make them available to people with below-average credit. While this means more people can qualify for store cards, it also means those cards come with downsides similar to subprime credit cards, which are designed for people with flawed credit. Store credit cards tend to have APRs that are much higher than usual, with interest rates in May 2018 averaging about 25.5% compared to the 16.73% average rate for all credit cards. They also typically come with lower credit limits than traditional credit cards, so using them often without constantly paying off your charges could seriously raise your credit utilization ratio. This ratio compares the amount of credit you are using to your total credit limit, and it’s a key component in determining your credit scores. The higher it is, the worse it reflects on your credit, making low credit limit cards a detriment to your financial health.

Also, some store cards may come with terms that aren’t exactly favorable to consumers, such as financing options with deferred interest. Deferred interest offers are kind of like 0% intro APR offers in that they let you avoid interest on your purchases for a period of time, but unlike 0% intro APR offers, you have to pay off your entire balance by the end of that period. If you don’t, or if you miss a single payment, you may be charged all of the back interest you would have accrued on those financed purchases up until the present.

Store credit card benefits are highly specialized

Fitting to their name, store credit cards usually offer perks and rewards that are restricted to the store they’re associated with. Most of the time, store cards can’t even be used outside of their particular store unless they’re co-branded with a major credit card network, such as Visa or American Express (a NextAdvisor advertiser). Though their benefits are limited, sometimes those benefits can also be legitimately good. As an example, the Target REDcard offers a 5% discount on many Target purchases. For comparison, the Discover it Cash Back earns 5% cash back for purchases that fall into the card’s bonus categories that rotate quarterly (up to the quarterly maximum, currently $1,500, then it’s 1% back) and 1% cash back everywhere else. Discover it Cash Back requires cardholders to activate the 5% cash back rewards every quarter, but it’s easy to do via Discover’s online portal. For most people, the Discover it Cash Back would be much more practical, but if you shop often at a single store, a store credit card may have rewards that rival traditional credit cards.

In addition to savings and perks like free shipping or extended return periods, another big feature of many store credit cards is an instant large discount on your current purchase or the next purchase you make. While that’s a nice benefit, these discounts tend to max out at $50 or $100, which isn’t that great when compared to some credit card intro bonuses. Of the rewards cards we review, the most modest intro bonuses tend to start at $150, and premium bonuses can go much higher, like Chase Sapphire Preferred Card’s bonus, which is worth as much as $625 when you redeem it for travel via Chase Ultimate Rewards. Though store credit card discounts tend to apply instantly and have no spending requirement, they still aren’t as valuable as many intro bonuses.

Store credit card signups can be high pressure

When you’re looking for a new credit card, the sensible thing to do is to browse your options, compare their benefits and then pick the card that will bring you the most utility or fit your life the best. Often, the process for getting a store credit card is the opposite of this. Instead of carefully researching beforehand, you’re asked if you want one while you’re checking out, sometimes with the added pitch of saving money on your purchase with the card’s instant discount. You probably want the discount, but you’re discouraged from looking into the card further because that will hold up the line. This pressures you to make a snap decision for opening a new line of credit, which is a financial responsibility that you shouldn’t take lightly.

Bottom line

Most store credit cards aren’t amazing, coming with high APRs and low credit limits, but they can be helpful if you shop at a specific store regularly, as the discounts and perks available on some aren’t bad. If you get one, though, read the terms agreement so you know how its benefits work, and make sure you don’t carry a balance on it because the extra interest it charges will eat into your savings. Also, before you get a store credit card, you’ll want to make sure you have a good traditional rewards credit card in your wallet, as many store cards don’t earn rewards outside of their affiliated retailer and some don’t even work at other businesses.

If you aren’t in the niche of people who could really take advantage of a store card, check out our reviews of more generally useful credit cards. For more advice as well as the latest credit card news, follow our credit cards blog.

Disclaimer: This content is not provided or commissioned by the credit card issuer. Opinions expressed here are author’s alone, not those of the credit card issuer, and have not been reviewed, approved or otherwise endorsed by the credit card issuer. This content was accurate at the time of this post, but card terms and conditions may change at any time. This site may be compensated through the credit card issuer Affiliate Program.