Store credit cards: What are they & are they worth it?

A store credit card can offer you savings and perks at certain retailers. But as with any credit card, it’s a good idea to understand the card terms and where you’re able to use it.

Before deciding whether a store credit card is right for you, it may be helpful to learn more about how store credit cards work, their benefits and their potential drawbacks.

What you’ll learn:

• Credit card issuers work with retailers and other brands to offer store credit cards.

• A store credit card is a form of revolving credit that you use to make purchases and then pay down the balance.

• Store credit cards can come with additional perks and rewards when you use them at the stores they’re associated with.

• Store credit cards may also have more restrictions on where you can use them and higher interest rates than traditional credit cards.

Store credit cards, sometimes called retail credit cards, are offered by specific stores or brands. They’re typically meant for shopping at a particular store and offer store-specific rewards, such as discounts or points that can be used on future purchases.

Store credit cards work like traditional credit cards. They’re a type of revolving credit, which means you can buy items or services with the card and pay for them later. And if your card issuer reports your use of the card to the credit bureaus, your card should appear on your credit reports.

But there are generally two types of store credit cards: closed loop and open loop. They differ slightly based on where they can be used. Here’s a look at these two main types of store credit cards:

• Closed-loop store card: This kind of card is also sometimes called a private-label store card because it can be used only at the store or group of stores it’s associated with. And you might only earn rewards on purchases made at those stores. 

• Open-loop store card: This kind of card is also referred to as a co-branded card because it’s co-branded with the logo of the payment network—like Visa® or Mastercard®, for instance. An open-loop card can usually be used anywhere that accepts its payment network. In addition to earning elevated rewards at the store or group of stores, a co-branded card may also offer the opportunity to earn rewards outside the store.

Only you can decide whether a store credit card is worth it for you, as the answer can depend on subjective factors like your personal shopping habits and whether you tend to carry a balance. A store credit card might be worth it for the higher rewards and bonuses if you frequently shop at a certain store. But the annual percentage rate (APR) assessed when carrying a balance can be high.

Here are some potential pros and cons of store credit cards to consider before getting one:

A store credit card can be a great financial tool when used responsibly. Here are some possible benefits:

• Higher rewards: Using a store credit card in the store it’s associated with might earn you better rewards than using a traditional rewards credit card in the same store would. 

• Credit building: With consistent responsible use over time, store cards could help you build credit.

• Special bonuses: Certain store credit cards come with perks like promotional coupons, special financing or invitation-only cardholder events.

• Easier approval: Some store cards may be easier to qualify for than traditional unsecured credit cards.

Here are some potential drawbacks to consider before getting a store credit card:

• Higher interest rates: Typically, store credit cards have higher standard interest rates than traditional credit cards. 

• Lower credit limits: Depending on the specific offer, credit limits on store cards—especially private-label cards—tend to be lower.

• More restricted use: Compared to a traditional credit card, you might only be able to use private-label cards at certain retailers or brands.

As with other types of credit cards, you can use store credit cards to build credit with responsible use. Here are some ways that having and using a store credit card could positively affect your credit scores:

• Payment history: Paying your store credit card bills on time can help your payment history. Your payment history shows how well you’ve done with making payments on time. The better your payment history, the better your credit scores might be.

• Credit utilization ratio: Keeping your store credit card’s balance low can benefit your credit utilization ratio. Credit-scoring models generally pay close attention to your credit utilization ratio. This is a measure of how much of your available credit you’re using. The Consumer Financial Protection Bureau recommends keeping your credit utilization ratio below 30%.

• Credit mix: Credit-scoring models also take into account the variety of credit accounts you use. A store credit card could add to your proven experience handling different types of credit.

A new credit application typically triggers a hard credit inquiry when the issuer checks your credit reports to decide whether to approve your application. A hard inquiry can make your credit scores drop—usually by just a few points temporarily. But having too many hard inquiries in a short period of time could have a bigger negative impact.

Did you know Capital One issues co-branded store credit cards? 

Here are some options available from Capital One:

• Bass Pro Shops CLUB Card

• Bass Pro Shops and Cabela’s CLUB Business card

• BJ’s One® Mastercard®

• BJ’s One+® Mastercard

• Cabela’s CLUB Card

• Key Rewards® Visa

• Kohl’s Rewards® Visa

• Pottery Barn Key Rewards Visa

• REI Co-op® Mastercard

• T-Mobile Visa

• West Elm Key Rewards Visa

• Williams Sonoma Key Rewards Visa

Store cards can be a great financial tool when used responsibly. And depending on the card, they can offer discounts, exclusive benefits and access to experiences that aren’t available to the general public. 

Compare credit cards from Capital One to find a card that might work for you.

Whether your idea of a good time is getting out on the town, traveling the world or staying in, Capital One has a rewards card that may fit your lifestyle.

• See if you’ll be approved for rewards cards, with no harm to your credit scores. 

• Explore travel and miles rewards credit cards with unlimited miles you can actually use. 

• Earn unlimited 1.5% cash back on every purchase, every day, with a cash rewards credit card.

• Earn cash back, whether you’re going out or staying in, with a dining and entertainment credit card.