Store credit card buying guide

Retailers offer a confusing array of card options. Many offer co-branded credit cards bearing an American Express, MasterCard, or Visa logo, which can be used anywhere those cards are accepted. You'll earn points on all your purchases with the card, not just at the store that issues it. Another type is a store charge card, which can be used only at the issuing retailer. Some large chains, including Bloomingdale's and Macy's, issue store charge cards and co-branded credit cards.

Recently some retailers, such as Target and Nordstrom, have offered store debit cards, which are linked to the holder's checking account. These might seem like a good idea since you might spend less with a debit card than with a credit card, but there are drawbacks. Retailer debit-card transactions are treated like electronic funds transfers, so typically they won't post to your account until the second day after your purchase. If you don't take that into consideration, you might think you have more money in your account than you really do. Moreover, Target and Nordstrom charge fees if you use their debit cards without having enough in your account to cover the purchase. Target's fees run from $20 to $40, and Nordstrom charges $25. If you've opted into your bank's overdraft protection program (which we don't recommend you do), you'll also pay an overdraft fee to your bank, typically about $35.

Another type of store credit card can be used only to finance a big purchase. These cards are issued by electronics or home-improvement stores, such as Amazon, Apple, Best Buy, Home Depot, and Lowe's. Most offer six months to a year of zero-percent financing, though some stretch it out even longer. For example, Lowe's offers up to 18 months of zero-percent interest on certain purchases over $599, and Amazon.com gives up to 24 months in a few product categories, including HDTVs. These cards can save you quite a bit if you need to spread out payments on a big purchase. But there is a catch: If you don't pay off the balance in full by the end of that period, you'll be charged interest retroactively to the date of purchase.

Many retailers try to lure you into opening a card account by offering a juicy 10 to 15 percent discount on all purchases made on that day. If you're buying a lot, the savings can be an incentive, though there may be a cap on the amount you can spend.

But you should avoid opening several credit-card accounts at once--a common holiday-shopping pitfall--because it could cause your credit score to drop. And since some store cards have very low monthly credit limits, you might end up charging close to the limit. That will increase your debt-to-available credit, which can also lower your score.

Opening multiple card accounts in a short period could also reduce the average length of your credit history, a component that makes up about 15 percent of your score. If you open just one store card to take advantage of the up-front savings on a large purchase, that might drive your score a bit lower, but only temporarily.

And if you can't pay your monthly balance in full, the interest you'll pay could wipe out the discount you got for signing up for the card. The average bank credit card has an interest rate of about 14 percent, but cards from Bloomingdale's, Macy's, and Sears have interest rates of about 25 percent. Some store cards are even higher: JCPenney (27 percent), Office Depot (28 percent), Zales and Goodyear (29 percent), and Napa Auto Care, a whopping 30 percent interest rate.

Some card offers base their interest rates on your creditworthiness. Nordstrom's credit card, for instance, offers rates as low as 10.9 percent and as high as 22.9 percent. But a store credit card might be easier to get than a bank card. "Even if your credit is marginal, you're likely to get approved for a store card, and that could help you build a credit history," said Curtis Arnold of CardRatings.com, a credit-card comparison website. But people with marginal credit are likely to get a high rate on those store cards, Arnold adds.

Make sure you read the terms of your card agreement and rules regarding the rewards (including whether your points expire) before you sign up for a store card. For example, rewards from BJ's, Cabela's, L.L. Bean, and JCPenney come in the form of coupons for savings on purchases at those stores. Cabela's imposes no expiration date, but JCPenney's rewards coupons expire within about a month, BJ's in six months, and L.L. Bean's in a year.

It might be that you could get the same or better payback with a general rewards credit card that's not affiliated with a retailer. For example, Walmart's credit card offers up to 1 percent cash back on all purchases. But in the fine print, you'll see that you earn just 0.25 percent on the first $1,500 a year in purchases, and 0.5 percent on total annual purchases from more than $1,500 to $3,000. You begin earning 1 percent back on purchases only after you've spent $3,000 in a year. Unlike many other store cards, you don't get additional rewards on purchases you make at Walmart. But you do get 5 cents off each gallon of gas at participating Walmart gas stations through the end of the year. You might be better off, though, with a good cash-back credit card that earns you a higher level of rewards wherever you use it.

If you don't spend a lot of money in a particular store every year, you might find that you don't earn much in rewards. For example, Macy's has four card programs. The most basic--for people who spend less than $500 at the store a year--offers no cash back. But if you spend $500 to $999, you'll get 1.5 percent cash back on Macy's purchases. If you spend $1,000 or more, you'll earn 3 percent rewards on purchases plus access to a priority customer-service phone line.

If you shop at allot of fashion-oriented department stores, such as Bloomingdale's, Macy's, Neiman Marcus, and Nordstrom, using a store card can earn you such perks as free shipping and alterations at the lower spending tiers, and invitations to private sales and fashion shows or concierge services at higher spending levels. The perks vary from card to card.

Macy's and Walmart cards allow you to earn more rewards when you spend more money, but some cards put a cap on rewards you can earn in some categories. For example, the co-branded Costco American Express card offers 3 percent back on gasoline purchases, but only on up to $3,000 in spending annually. Once you reach that, you'll earn just 1 percent cash back on purchases at the pump.

APR: 13.24%, 18.24%, or 21.24% based on creditworthiness

Features: 3 points for every $1 spent at Amazon; 2 points for every $1 spent at gas stations, restaurants, drugstores; 1 point per $1 spent elsewhere. $30 sign-up bonus.

APR: 23.99% with Visa card, 24.99% with store card

Features: 5 points for every $1 spent at any of the stores, 1 point for every $1 spent elsewhere. 15% off first-day purchases. 1,000 points earns $10 certificate good at any of the stores. Earn 2,000 points for signing up for e-mail updates.

APR: 13.99% or 24.99%

Features: 5% back as credit on your statement. $25 gift card with first purchase.

APR: 13.99% or 24.99%

Features: 2 points for every $1 spent with BJ's Visa at BJ's stores and gas stations, 1 point for every $1 spent elsewhere. 3,000 points earns $30 in BJ's Bucks on next monthly statement, good toward purchases at BJ's.

APR: 24.5%

Features: After spending more than $1,000 annually, 3% back on store purchases, 1% elsewhere. 12 free gift wraps annually. 10% off first 2 days' purchases. Double- and triple-points days.

APR: 9.99% at store, 15.26% to 18.26% elsewhere

Features: 2% back on store purchases, 1% elsewhere with Visa card. Earn $20 in points for signing up for Visa card.

APR: 0% for 6 months, 15.24% after

Features: 3% back on gas purchases up to $3,000 a year, 1% after; 2% on restaurants and travel, 1% elsewhere, including Costco. Rewards issued annually.

APR: 26.99%

Features: 5 points for every $1 spent at the stores, 1 point for every $1 spent elsewhere. 10% off first purchase.

APR: 26.99%

Features: 1 point for every $1 spent at store. 20% off first purchase. Monthly double-point bonus.

APR: 25.24%

Features: Special financing offers. Access to credit score.

APR: 21.9%

Features: 15% off first purchase. Extra discounts of 15% to 30% 12 times a year. After spending $600 in a year, get 6 personal sale days.

APR: 13.99%, 16.99%, or 19.99%

Features: 3% rewards on store purchases, 1% elsewhere. Rewards given in $10 coupons. Free shipping, return shipping, and monogramming.

APR: 24.5%

Features: 1.5% to 3% rewards for each $1 spent at store, 1% elsewhere with American Express card. Periodic savings events. Returns accepted without receipt. 15% off purchases during first 2 days with store card.

APR: 22.9%

Features: 5% off at checkout. After filling 5 prescriptions, coupon for 5% off on a future shopping trip.

APR: 22.9% with Walmart Discover card or store card

Features: $20 back on day the account is opened on purchases of $100 or more. Save 5 cents per gallon at some Walmart gas stations. Up to 1% back on purchases with Walmart Discover card. Rebate checks issued with every $10 in accrued rewards.