Before You Get a Store Credit Card, Ask These 3 Questions

Don’t open a credit card tied to a specific retailer without checking these details first.

You've probably encountered this scenario before: You're checking out a bunch of items at a retailer when the cashier asks if you'd like to save money on your purchase by opening a store credit card. Your initial reaction might be, "Sure, I'll sign up and snag a sweet discount." But before you do, know that opening a store credit card isn't always a great idea.

Unlike regular credit cards, which can generally be used almost anywhere, store credit cards can only be used in the specific retail locations associated with them. Now some store cards are co-branded with Visa, MasterCard, or American Express, and in those cases, you can use them for any purpose. But without that co-branding, you're limited to the issuing retailer itself. With that in mind, here are a few key questions to ask yourself before opening a store credit card.

1. Is the sign-up bonus really worth it?

Usually, you'll get some initial incentive for opening a store credit card, like a certain percentage off your purchase, or a certain dollar amount deducted from your total. But before you move forward, if the store is one you shop at often, make sure you're taking full advantage of that initial sign-up bonus. 

Let's say the offer in question is 10% off, and you're buying $100 worth of items. Sure, a $10 discount is nice, but if you think you'll spend $300 at that same store in one fell swoop during the holidays, it pays to open that card then and get three times that amount of free store cash.

Along similar lines, figure out whether you're better off opening up a regular credit card with a generous sign-up bonus instead. And, if it's a big purchase, consider delaying it so you can put it on your new card.

2. What does the rewards program look like?

Store credit cards generally offer ongoing rewards, like points or store cash back for charging purchases. But before you open a store card, figure out if you qualify for a regular credit card with a more generous rewards program. For example, you may get 1% store cash back with that store card, but if you're eligible for a regular card offering 2% cash back at all retail locations, you're better off going with that option instead.

Also, keep in mind that reward programs associated with store credit cards can be somewhat restrictive. For example, the cash or points you earn using your store card might expire within a month or two of being issued, whereas with a regular credit card, you're not limited to that type of narrow window. 

Furthermore, you may be better off with credit card rewards that aren't limited to a single retailer. For example, if you have a month when a few extra bills come up, the option to cash out $50 in regular credit card rewards could come in very handy, whereas having $50 that's only redeemable for clothing and accessories may not help you.

3. What's the interest rate attached to this card?

Store credit cards are notorious for charging exorbitant amounts of interest. This means that if you rack up a balance you can't pay off by the time it comes due, you'll end up spending more money than necessary on your purchases. 

Make sure you know what the interest rate is, especially if you are likely to carry a balance, before signing up.

Be wary of store credit cards

The upside of store credit cards is that they're sometimes easier to qualify for than regular credit cards, especially since they tend to come with lower credit limits. But remember, any time you apply for a new credit card, it can hurt your credit score ever so slightly. If you're going to seek out a new credit card, you may be better off finding a regular rewards card which has excellent perks and gives you more flexibility to make purchases.