6 Important Reasons to Avoid Store Credit Cards

One of my very first jobs was selling retail at a store in the mall.

Working usually helps your finances, but that job was one of the causes of my issues with debt. It’s hard to resist buying new things when you spend the workday surrounded by advertising and sales displays.

Self-control becomes even more difficult when you can be instantly approved for a store credit card. I could only give my spiel about the “benefits” of our card so many times before signing up myself.

I paid for that mistake for quite a while.

I’ve become wiser about finances in the years since then, but still can’t go into a store without being solicited to sign up for a credit card. There is always some type of incentive, but is it ever a good idea to sign up for a store-branded credit card?

The short answer is: no. The cons to store credit cards easily outweigh the temporary perks that come with signing on the dotted line. These are the top reasons why you should almost always dismiss the sales pitch and avoid signing up for store credit cards.

Store Branded Credit Cards

1. High Interest Rates

Most types of credit cards average around 16% APR. Store credit cards, on the other hand, are usually well in excess of 20% APR. Stores can easily afford to give you 10% or even 15% off your first purchase because they will make it all back if you don’t immediately pay off your balance.

Also, the high interest rates for store credit cards tend to be a standard number for everyone. This means that even if you have a great credit score, it will not provide you with any benefit when it comes to the interest rate for store credit cards.

2. Increased Spending & Debt

Odds are that you’re in the store with plans to make a purchase. Then, they offer you a discount on your total purchase that day, if you sign up for a store credit card. Once approved, who is actually going to stick with just one or two items? The people who are duped into signing up for the store credit cards are also going to buy a bunch of extra things to “take advantage” of the one-time deal. Not to mention the fact that they now have available credit to use, keeping cash in their wallets (at least for the time being).

As the holder of a store-branded credit card, you will start receiving emails and mailings to keep you up to date on every new promotion. The stores may also send you special coupons. These could tempt you to spend even more.

It is all too easy to get caught up in the moment and be distracted by the “deals.” People forget how they will have to pay back every penny that they spend.  And when they don’t, the balances will continue to grow thanks to the large interest rates.

3. Restricted Use

You are not going to see any of the typical credit card symbols on a store-branded one.  That is because they are only good for the one, specific store. You may be able to use it for different locations, but don’t bother trying to buy groceries with one of your mall credit cards. Multiple credit cards mean a thicker wallet, more due dates to keep track of, and more bills in the mail.

4. Credit Score

As store cards can only be used for one retail location, you will need numerous cards to do all of your shopping. The big problem with this (besides an overflowing wallet) is that too many credit cards will hurt your credit score. And you will lose some points for the credit card inquiry when you apply in the store.

You may not realize that credit scores are calculated, in part, on a comparison between your account balance and the amount of available credit. Store cards usually have low credit limits. If you carry a balance on these cards, it will negatively affect your credit score because of the low percentage of available credit.

5. Impulse Decisions

Quick decisions rarely tend to be good ones. As someone who previously cajoled customers into signing up for store cards, I remember the quick and streamlined process. Once someone agreed to apply, you wanted them signing off right away. You didn’t want to give them time to read fine print or reconsider. And don’t be too proud about being approved for a store card – almost everyone is approved. It usually takes more time to convince someone to apply for a card, than it does to get them approved.

6. You Will Likely Lose Money On Interest & Late Fees

It’s easy to rationalize that you’ll pay off the total amount due on your credit cards each month, but it doesn’t always happen. Stores know that the odds are in their favor when it comes to credit cards. A large percentage of customers who sign up for cards, will be paying them off for some time to come. Forgetting to pay the bill on time could cost you as much as $30 for a late fee. The amount lost on a minor discount or coupons is quickly regained by the stores as you carry a balance and/or make a late payment.

What credit cards should you sign up for? Try a card that actually gives you long-term rewards.  Travel rewards cards are a good example.  These types of cards can be used all over the world and have lower interest rates. Also, instead of receiving coupons or discounts that encourage additional purchases, you can score free plane tickets or stays at hotels. As always, the key to benefiting from the use of credit cards is not spending more money than you can afford to pay back. Credit card debt can be a huge problem, but it can be avoided by paying off your balance every month. Only then, do you really benefit from the incentives offered by any credit card company.

What has been your experience with store-branded credit cards?

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About Harmony Smith

Harmony Smith blogs at CreatingMyKaleidoscope.com. She is a working mom of five who is fighting to pay off debt, so she can escape from her 9-5 job, and spend more time with her family. Harmony blogs about saving money, increasing her income with side hustles, DIY projects, and other adventures.


  1. Jenna, Adaptu Community Manager says:

    I think getting a store credit is worth if for major purchases, TVs or grills, or a remodel of a kitchen. Other than that for clothes and such, not so much…

  2. Jon -- Free Money Wisdom says:

    I just stick with my normal credit cards and make sure they have rewards programs on them. I am not tempted to sign up for retail store cards due to my already stellar cashback bonuses on my cards. However, you do indeed have to watch out for them–they can snare you!

  3. Agree with this article completely! Some store credit cards come with no-interest finance offers, however, and used wisely (ie, only purchase what you would have purchased without the card in the first place), they can make sense for large purchases. For instance, a Lowe’s credit card is available to help finance the purchase of large appliances, and comes with a 6-, 12- or 18- month interest free payment offer. So long as minimum payments are made on time, and the balance is paid off before the offer expires (I calculate the payment to one month before the expiration), they can be a good deal.

  4. Joseph @ DebitversusCredit says:

    Depending on your shopping patterns and your discipline with paying cards off monthly I would agree with webdoyenne in her comment how certain cards can be worth it. Her example of course being Target — she consistently saves 5% and they donate money to her son’s high school. Pretty great deal in certain situations.

    That said I would agree that for the most part you’re much better off not having a store credit card. I do have ONE and as you said it has a super high interest rate (around 23% if I remember correctly). However the card I have also offers 0% financing quite often so I took advantage of it once to buy myself a new flat screen 😛

    I’m a sucker for new gadgets (my one weakness, other than that I’m pretty stingy with my money :P)

    • Philip Taylor says:

      I did the same thing back in the day with a Best Buy card. The 0% is tempting even if you can pay for it outright.

  5. I think you hit on one of the biggest long-term downsides: they keep sending you offers, discounts, and sales announcements, and so you’re constantly tempted to spend more.

  6. webdoyenne says:

    I do think the Target card is worth it. You get 5% off your purchases whenever you use it there, and they donate a small % of what you spend to the school of your choice. My son’s high school has received more than $30,000 since the program started.

    BUT pay it off every month because, like many of these cards, the interest rate is up there with the the type of loan where Big Louie will come around and break your thumbs if you don’t ante up.

    • Philip Taylor says:

      I’m curious what made you choose the credit card version vs the debit card? My wife and I are thinking about this one.