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Is a Store-Branded Credit Card Right for You?

store cards right for you?Last summer I was walking through a grocery store and a lady approached me about earning rewards for buying groceries. I gave her my information and for some reason, I missed it when she said I was applying for a store-branded card. To be totally honest, I didn’t figure it out until I received the credit card in the mail a few weeks later.

Store cards have grown in popularity as merchants look for ways to lure shoppers into their stores. But should you get one of these cards?

The Pros

  • Many store cards offer discounts on purchases. Target offers a 5% discount on purchases and no shipping when you order online. Other stores allow you to accumulate rewards every time you use the card at the store. I get a small, quarterly check based on purchases I made with my card.
  • A store-branded credit card may be a good way to purchase large ticket items. Do you need a washer or dryer? Are you remodeling your home? Home Depot does not charge interest if you pay off your purchases within a certain amount of time, usually six months.
  • Stores often give you a bonus just for applying for their credit card and another bonus when you make your first purchase. The bonuses are usually small, but it’s free money in your pocket.
  • Is your credit less-than-perfect? You may have a chance at getting a store-branded credit card than a card from your bank.

The Cons

  • Store-branded credit cards can have higher interest rates. Some could be as much as 232%. Even if you are approved, you may want to use the card only in a pinch and pay it off as soon as possible.
  • Some of these cards can only be used at the store that issued the card. This is true for Target and Home Depot.
  • You may only have a small credit limit. This may be fine if you only want to use it on occasion, but if you hope to do your Christmas shopping, you should consider saving or using another form of credit instead.
  • Every time you apply for a credit card, your credit score takes what is called a “hard” hit. This can reduce your score by several points. You may want to think about it before you apply.
  • If you have no self-control when it comes to spending, you may want to think twice about getting another credit card, especially if it’s from your favorite store. You don’t want to overextend yourself and end up with a high-interest credit card bill that will take years to pay.
  • Watch for application and annual fees. While many of the credit cards do not have fees, some do. Between this and the interest rate, the credit card may not be as good of a deal as it seems.

I have used my store card in a pinch and I have received some rewards. Do you have store-branded credit cards? Tell us about your experiences in the comments below.

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