5 Questions to Ask Before Opening a Store Credit Card

If you have a favorite retailer that you shop with often, you may have been asked about signing up for its store credit card. Many retailers promote store-branded credit cards to shoppers at the checkout line. It may be worthwhile to get a card if you'll earn rewards and get benefits.

However, you may get more value from a traditional rewards credit card offered by a big bank. Find out what questions you should ponder to determine whether a store credit card is right for you.

1. Is it a closed-loop or open-loop store credit card?

Before applying for a store credit card, verify whether it can be used only at one retailer or if you can use it anywhere. Some retailers offer close-loop store credit cards, meaning they can only be used at their stores or with retailers under their chain. Others offer open-loop cards that can be used anywhere the credit card network (like Visa) is accepted. So you can use them with the retailer where you opened the card and with most other retailers.

Understanding which card type you're getting is essential, especially if you're considering using it to pay for everyday purchases beyond purchases made with the brand.

2. Is the welcome offer worth it?

Many credit card companies promote welcome offers to draw in new customers. But some store credit cards have meager welcome offers. For example, a retailer may offer a one-time 10% off your first purchase when you sign up for its store credit card.

That's not a great deal, especially if your first purchase doesn't have you spending much money. Let's imagine you're buying a new comforter and spending $100. With this offer, you'll only get $10 off your order. Meanwhile, a cash back credit card might have a welcome offer that allows eligible new cardholders to earn $200 after spending at least $500 with their card in the first few months.

I don't know about you, but I'd rather earn $200 than save $10 on a new bedding set. Evaluate the welcome offer carefully to determine if you're walking away a winner.

3. How does the card earn rewards?

You'll likely earn rewards when you use your card to spend money with the retailer. But some store cards earn rewards for purchases in other categories, like gas or groceries -- plus purchases made with a specific retailer.

Understanding how the card earns rewards and whether they're capped or you can earn unlimited rewards is necessary. This will help you decide if the reward potential is promising.

4. Does it include valuable perks that you'll use?

Some credit cards include helpful benefits, such as purchase protection or monthly credits. However, store cards typically have fewer benefits. If you want a feature-packed card that earns rewards, consider skipping the store credit card and choosing a different card, like one of the best cash back credit cards. You'll likely benefit more from the latter.

5. How can you redeem the rewards you earn?

You'll want to review your redemption options for any rewards you earn. Some store credit cards allow cardholders to redeem their rewards as store credit, but others may offer other redemption choices, like cash back as a statement credit to your account.

If the redemption options are limited or not the reward type you prefer, you may want to look for a different credit card. Luckily, there are many other rewards credit cards to choose from.

Consider pairing a store credit card with another rewards card

Some shoppers employ a multi-card strategy. They might get a store credit card for their go-to retailer and then use a cash back credit card for everyday purchases elsewhere. Combining a store credit card with another rewards card is an excellent strategy to maximize the rewards you earn when swiping your cards. You may benefit from a similar approach.

Don't feel pressured to get a store credit card

At many retailers, it's now a regular occurrence for staff members to ask if you want to apply for a credit card. But don't feel pressured. If you're considering a card that your favorite retailer offers, don't sign up on the spot. Gather more details so you can make a more informed decision.

For some credit card recommendations and an overview of their top features, check out our list of the best credit cards.