Credit score

How do store credit cards affect your credit score?

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Anyone who’s made a purchase from a large chain store knows the drill: you go to the checkout and receive a sales pitch from the salesperson to sign up for the store’s credit card.

These store cards might seem like an easy way to save a few bucks – you’ll get access to regular coupons, annual discounts, and big savings on your current in-store purchase. But they can also have a big impact on your credit. Before signing up, consider whether you’ll get any long-term benefits beyond temporary, short-term savings, and make sure you understand the financial implications a store card may have.

Here’s what you need to know about store credit cards to make a more informed decision in the checkout line:

How do store cards work?

Store cards, or store cards, are a type of credit card that you can only use with one store or store family. Usually, you can use them both in-store and online to buy goods just like you would with a traditional credit card, while still getting discounts or perks you wouldn’t otherwise have access to.

The Kohl’s credit card is a good example. It is a payment card, so you can only use it for purchases in Kohl stores or on, and its main advantages are special sales and frequent promotions for cardholders, such as discounts ranging from 15% to 30%.

The Kohl’s credit card does not charge an annual fee, but its variable APR is high at 25.99%. This is common among store cards, although their features may vary depending on the retailer offering them.

Are store cards the same as regular credit cards?

What you probably think of when you imagine a store card is a closed-loop retail card. This is a credit card that you can only use to make purchases from the merchant you open it with, like the Kohl’s credit card above or the Lowe’s Advantage card.

There are also other factors that make store cards different from traditional credit cards. For starters, retail store cards are generally much easier to obtain, says credit expert John Ulzheimer, who previously worked for FICO and Equifax.

This is usually due to the subprime terms offered by store cards, Ulzheimer says. These terms can include astronomically high APRs and very low credit limits – sometimes as low as a few hundred dollars. “Subprime terms mean a higher approval rate because the lender can deepen the credit quality pool,” he says.

This is why it may be easier to get approved for a store card than a general credit card, even if you have limited credit history or no credit history.

There are some retail co-branded credit cards today that look more like regular credit cards and generally have more stringent credit requirements, such as the Amazon Prime Rewards Visa Signature Card, issued by Chase. Although these open-loop cards provide an additional incentive in the store they are associated with, you can use them anywhere credit cards are accepted.

Some merchants even offer both types of cards, such as the Target REDcard™ from Target, issued by TD Bank. You may be considered for the Target closed-loop credit card instead of the Target open-loop Mastercard, depending on your creditworthiness and other factors (Target clarifies that the Mastercard may not be available to new applicants).

How do store cards affect your credit score?

One of the main benefits of store cards – and the reason they’re popular as the first credit card – is building credit. Your credit balances and payments are reported to all three credit bureaus, which (if you use your card responsibly) can help you build credit and improve your credit score over time.

Pro tip

If you’re having trouble getting approved for a traditional credit card, a store card can help you start building your credit. Your initial credit limit may only be a few hundred dollars, but you’ll have the chance to improve your score through responsible use.

Store cards can also improve your credit in other ways, including adding to your credit mix, says Eric Ellman, senior vice president of public policy and legal affairs at the Consumer Data Industry Association. If you only have a car loan on your credit report, for example, adding a credit card (including store cards) can help show future lenders that you can juggle more money. a type of loan.

“It’s generally a good thing to show lenders and creditors that you can manage different types of credit accounts responsibly,” Ellman says.

Applying for a store card will also result in a thorough investigation of your credit file, just like applying for a traditional credit card. It’s pretty standard and nothing to worry about in the long run, but too many tough requests in a short period of time can negatively impact your credit.

Is it better to get a store card or a regular credit card?

There are situations where a store card can be advantageous, or even one of the few options available to consumers.

Ellman says store cards can be ideal for people who are “young and new to the country,” as well as “new residents of the United States with no credit history.” If you’ve struggled to get traditional credit cards from major issuers approved in the past, a retail card can be a good market entry point, he says.

Store cards can also be useful if they match your shopping habits. If you have a big purchase coming up, like a kitchen appliance or TV, a store card discount can mean big savings. And for retailers you already frequent and would spend money with, store cards can provide great ongoing value and special perks.

But these cards are not very versatile. You’ll only get savings on products you buy from the store card retailer, and a closed-loop card won’t help if you have a surprise medical bill or car repair.

For most people, a general cash back credit card will offer more flexible savings on everyday purchases. For example, you can earn 2% on everything (1% when you buy, an additional 1% when you pay) with the Citi Double Cash Card. If you really think a store card will add value to your spending, consider pairing it with a more flexible card for your other budget items.

  • Introductory offer:

    N / A

  • Annual subscription :


  • Regular APR:

    13.99% – 23.99% (Variable)

  • Recommended credit:

    670-850 (good to excellent)

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Whenever you decide to open a new credit card, remember that borrowing money always involves risk. This is true whether you are applying for a regular rewards card or a store card that only works with a specific retailer.

“Consumers need to be careful about their drinking habits,” Ellman says. Retail cards often come with higher interest rates which can make anything you buy much more expensive if you don’t pay your balance in full each month. If you use a store card to rack up debt that you can’t afford to pay off, any savings on your original purchase will quickly be wiped out.

Think about how a store card could affect your long-term spending, rather than falling into a sales pitch at checkout. “It’s important that consumers don’t make an impulsive decision and instead look at the fine print — benefits, rewards, obligations and fees — before opening an account,” Ellman says.

If you open a store card, use it when you qualify for discounts on purchases you intended to make anyway. Always pay off your balances in full and on time, and keep your balance well below your credit limit to maintain good credit. Luckily, many store cards don’t charge an annual fee, so you can keep your card open at no cost and only use it when you want to save money.