Buzz
We’ve all experienced it. You’re at the checkout counter of your go-to store, and the cashier asks, “Would you like to apply for a store credit card today?” The lure of store-branded cards can be hard to resist. If you’re a regular shopper at one store or brand, the promise of discounts and rewards can be tempting. But more often than not, these offers are designed to push you into a decision that you might later regret.
Before you apply for that store card, here's what you should know to fully understand the terms and the commitment you’re about to make.
How Store Credit Cards Operate
Store credit cards are ‘closed-loop cards’ that can only be used at that specific retailer or affiliated stores. For example, if you sign up for a TJX Rewards card at T.J. Maxx, you won’t be able to use it for gas or groceries. Unless, of course, T.J. Maxx (or its sister stores Marshalls and HomeGoods) decides to start selling gas and groceries (we’re keeping our fingers crossed!).
The main allure of store credit cards lies in the opportunity to earn rewards, as detailed below.
Benefits of Store Credit Cards
Here are a few enticing advantages of store credit cards that may persuade you to apply for one.
Earn rewards: If you're a frequent shopper at a particular retailer, a store credit card can seem like an excellent way to earn rewards on your purchases.
Bonus perks: Some store cards offer additional bonuses, such as card-exclusive discounts.
Easy to qualify for: This is especially attractive if you're working to improve your credit score and have trouble qualifying for traditional credit cards.
Drawbacks of Store Credit Cards
Before you dive into the potential rewards of store credit cards, it’s crucial to read the fine print. Many store cards come with deceptive or concealed terms and conditions:
So-called zero interest: Many store promotions that advertise “zero interest” actually offer “deferred interest,” according to Bankrate. This means any balance remaining after the promotional period ends will be retroactively charged interest.
Low credit limits: With low credit limits, you might constantly be at risk of maxing out your store card, which can harm your credit score.
Limited usage: This is a crucial point: if you're unsure whether you’ll be able to earn valuable rewards at the specific store, signing up for a card that only works there is not worth it.
The Bottom Line
If you’re planning to apply for a store credit card, take the time to think it through. The worst time to make such a decision is when you're at checkout with a line of people behind you. Don’t be swayed by the temporary discount they offer if you sign up right then and there. For most people, the drawbacks of store credit cards outweigh the rewards they offer.
