Store Credit Card Buying Guide

Store credit cards often feature enticing goodies that are ultimately designed to wed you to their retail brand or card-issuing partner. Target, for instance, gives REDcard holders 5 percent off most purchases–at Target. The Rewards Visa, meanwhile, offers 3 percent back for purchases at Amazon, 2 percent back at restaurants, drugstores, and gas stations, and only 1 percent for spending elsewhere.

Some retailer cards offer other kinds of perks, such as special sales that are available only to cardholders, no-receipt returns, free shipping, and offers of zero-interest financing. You might even get a cash bonus of $20 to $30 just for signing up for the card.

But there's a downside: Some store cards have interest rates in the mid-20 percent range that are double what you'd pay with traditional credit cards, and opening too many accounts at once could tarnish your credit score. Here are some tips to find store cards that will pay off for you. 

Get the Right Type

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, but you'll probably earn less for using the card at other retailers. Another type of store charge card can be used only at the issuing retailer, a marketing tactic that aims to make it easier for you to spend now at the home store and pay later. Some large chains, including Bloomingdale's and Macy's, issue store charge cards and co-branded credit cards.

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 to grease the sale of expensive merchandise. Apple Rewards Barclaycard, for example, offers instant credit with the chance to repay the loan over 18 months and pay zero interest charges, as long as you make a purchase within 30 days of opening the account. But there's a catch: If you don't pay off the balance in full by the end of that period, or if you're late with only one payment any time during that year-and-a-half, you'll be charged the full interest rate for the entire 18 months. 

Guard Your Credit

Some retailers try to lure you into opening a card account by offering a 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, and the discount doesn't apply to all the subsequent purchases you'll make with that card.

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 temporarily.

And if you can't pay your monthly balance in full, the interest you'll be charged could wipe out the discount you got for signing up for the card. The average bank credit card has a variable interest rate that's significantly lower than those of big retailers, such as Bloomingdale's, Macy's, and Sears. Some store cards, like those offered by JCPenny, HomeGoods, Marshalls, and T.J. Maxx, can be even higher. 

Maximize Your Benefits

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 L.L. Bean come in the form of coupons for savings only on Bean gear and apparel. Meanwhile, JCPenney points don't roll over or accumulate from one month to the next, so you could lose points not redeemed by month's end.

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. So check the terms and conditions to see how that could affect the rewards you receive. 

Also, some cards put a cap on rewards you can earn in some categories. For example, the co-branded Costco Citibank Visa card offers 4 percent back on gasoline purchases, up to $7,000 annually. Once you reach that, you'll earn just 1 percent cash back on purchases at the pump. 

Comparing Store Credit Cards

Want to get a little something back for all you spend at your favorite stores? Here are the details on credit cards offered by some major retailers, listed in alphabetical order. The programs can be complicated. For example, many stores offer several cards, including co-branded American Express, MasterCard, and Visa cards, which can be used elsewhere. Some programs offer different rewards based on the amount you spend. Card issuers can change interest rates, terms, and conditions at any time. Rewards Visa
APR: 14.74% to 22.74% based on creditworthiness
Features: 3 points for every $1 spent at Amazon; 2 points for every $1 spent at gas stations, restaurants, and drugstores; 1 point per $1 spent elsewhere. $50 Amazon gift card as a sign-up bonus.

Bloomingdale's American Express
APR: 25.9%
Features: 3 points per dollar spent on store purchases, 6 points per dollar spent on cosmetics, fragrances and shoes purchased at Bloomingdale's. 2 points per dollar on all purchases elsewhere. The basic store card gets you 15% off first 2 days' purchases, up to $250. On December 31 of each year, 75% of all remaining points on your account will be forfeited.

Citi Costco Anywhere Visa 
APR: 0% for 7 months, 15.49% after
Features: 4% back on eligible gas purchases anywhere, including at Costco, up to $7,000 a year, 1% after; 3% on U.S. restaurants and eligible travel purchases worldwide, 2% for Costco and purchases, 1% elsewhere. Rewards issued annually.

APR: 23.99%
Features: 25% off first purchase. Extra discounts of 15% to 30% at least 12 times a year. After spending $600 in a year, get at least 6 more discounts per year.

Walmart MasterCard
APR: 17.4% to 23.4%
Features: Rewards percentages depend on the type of purchase made; 3% for purchases (includes Walmart Pickup and Site to Store purchases); 2% for gas purchases at Walmart fuel stations and Murphy USA gas stations; and 1% on all other purchases wherever the Walmart Credit Card and Walmart MasterCard are accepted.

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