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Should You Get a Store Credit Card?

store credit card

Store Credit Card, yes or no? Spoiler alert: They often are too good to be true

“Save 5% on all purchases!” “Get cash back!” “Cut your costs at the pump!” At checkout at many big box stores, supermarkets and mall shops, it’s nearly impossible to avoid hearing a pitch for the store’s credit card from the cashier.

From Target and Costco to Gap and Macy’s to Home Depot and Lowe’s, most mainstream retail businesses offer a store credit card—and “deals” to go with it. And many Americans have at least one in their wallet. According to a recent report from Experian, the credit reporting agency, 40 percent of American consumers have a retail store credit card.

These cards are offered through a collaboration between a credit card company and the store, where it can only be used. But they aren’t always as great as the cashier makes them sound. Store credit cards can come with some big drawbacks and encourage some unhealthy spending if you’re not careful.

Here are the four things you need to know about store credit cards

They’re expensive

The average interest rate for a typical Visa or Mastercard in your wallet that’s not tied to a specific store runs between about 12% and 15%, according to the Federal Reserve. But, for retail credit cards, that same number can be double or nearly triple the average amount.’s annual report on retail credit cards pegged the average at around 25.6% but found some as high as 30%. In some cases, according to the report, consumers sign up for a deferred interest deal, where they pay no interest for a period of time, before it shoots up to 25% or more.

“Deferred interest may sound like a good deal, but the fine print can be extremely costly,” said industry analyst Ted Rossman in the report. “Just $1 remaining would result in retroactive interest being charged on the total balance.”

The deals aren’t always as great as they sound

A 10% or 20% discount on your first purchase as soon as you sign up for the credit card may sound fantastic. But, in many cases, those big price cuts won’t continue for every other purchase you make with the card. And you may get those very same deals, according to Experian, when you use a store coupon or a regular credit card that’s already in your wallet with a cashback or discount deal.

You’re more likely to spend money at the store

Stores don’t offer credit cards out of the goodness of their heart. They do it because it earns them money. Stores save money on credit card processing fees when you use their cards and even earn money from the credit programs themselves. In 2012, for example, Macy’s made a whopping $865 million from its partner Citi thanks to consumers who used their Macy’s card at the store, according to an article about store credit cards on IBM.

What’s more, customers with a retail credit card are more likely to visit the store. The IBM story highlights another study that found that people with retail credit cards visit the store 29% more often. Those extra visits can add up to plenty of opportunities to spend money that’s not in your budget.

It could hurt your credit score

Credit scores help lenders decide if you’re trustworthy enough to get a loan for a new car or home, for example. And credit reporting agencies are mostly interested in how you spend and pay back the credit that you have.

But applying for multiple credit cards can impact your credit score. While the impact may not be huge, applications for credit, especially multiple ones, could signal to lenders that you may not be a worthy risk.

“Because lenders may view multiple applications for credit cards within a short period of time as a sign of financial distress, your credit scores will reflect that risk,” according to Experian.

In other words, it’s important to be deliberate about any applications for credit that you might fill out. And it’s unlikely those deep thoughts about your financial future can happen in the checkout lane. So, next time you’re checking out, it might be best to decline those store credit card offers.

The team at CESI is committed to helping you make wise financial decisions and to helping you understand how to get out, and stay out of debt.  For a free debt analysis, contact us and find out how we can help.


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