Should You Ever Say Yes to a Store Credit Card?

Think back to the last time you were in one of your favorite stores. Did the cashier ask if you'd like to apply for a store credit card as you checked out? If so, you're not alone. Retailers know that if you have a store credit card, you're more likely to shop there, and cashiers are encouraged to tout the benefits offered to cardholders.

Typically, if you apply and are approved for a card, you'll receive an instant discount on that day's purchase. As tempting as it may be, is it ever a good idea to say yes? Let's take a closer look at the pros and cons.

Pros

There's no doubt that store credit cards can have a lot going for them.

1. Easy credit

If your credit score is low, you may find it easier to qualify for a store credit card than a traditional card. Even though credit card issuers don't advertise the specific score needed to qualify for a retail credit card, real-life approval rates indicate that some store cards approve applicants with poor credit (a FICO® Score under 580). If you've grown frustrated by trying to land a credit card, easy credit can be quite attractive.

Insider tip: It's important to remember that some major credit card issuers offer cards to applicants with low credit scores and that retail cards are not your only option.

2. Opportunity to build your credit score

A store credit card gives you the opportunity to establish or improve your score if you've struggled in the past or are building credit for the first time. Making payments on time each month and maintaining a low credit utilization both contribute to raising your credit profile.

3. Attractive discounts and perks

Store credit cards are designed to develop a loyal customer base. One way retailers keep shoppers coming back is by offering discounts and rewards to those who hold store cards. Everyone wants to feel special, and what's more special than receiving special discounts, extended shopping hours, and perks like free gift wrapping?

3. Financing options

Some stores offer sweet promotional financing to cardholders. For example, an appliance store may offer an interest-free period to those who purchase a refrigerator or washer-dryer combo. Another may offer the same interest-free period to anyone who uses their store credit card to buy a living room set. This feature could appeal to an individual who wants to make a large purchase but pay for it over time without accruing interest.

Cons

Despite several appealing features, it's worth examining the underbelly of store credit cards.

1. High interest rates

Store credit cards tend to carry higher interest rates than the best traditional credit cards. The average APR for traditional cards in the first quarter of 2024 was 21.59%, the highest since the Federal Reserve began tracking card rates in 1994. At the same time, nine of the largest credit card issuers in the country reported offering at least one credit card with an annual rate of over 30%, but here's the rub: Most of the sky-high interest rates were assigned to cobranded cards offered through retail stores.

2. Temptation to overspend

The continual barrage of promotions and discounts can entice a person to make purchases they could easily live without. This is especially true of emotional spenders who risk their checking account balance to feel better -- if only for a short time.

3. Limited use

Unlike a traditional credit card, many store cards are closed-loop, meaning they can only be used at specific retailers or affiliated stores. This limitation can make it tempting to open new accounts with other retailers. In addition, a store card isn't useful in an emergency situation. Let's say you're away for the weekend and your car breaks down in a strange town. You haven't gotten around to building an emergency savings account, but need a way to pay for repairs. No auto repair shop is going to accept a Home Goods or Nordstrom-labeled credit card.

4. Once the card is in your wallet, you're stuck with it

There's something to be said for taking time to carefully consider whether you want to apply for a specific credit card. That can be tough to do when you have the earnest gaze of a very nice cashier waiting for you to decide.

Unfortunately, once you have a card in your wallet, canceling it can damage your credit score by decreasing your credit utilization ratio. Credit utilization ratio refers to how much credit you have available to you vs. how much you're using. You want to use as little of your available credit as possible at any given time. For example, owing $100 on a card with a $3,000 spending limit is better than owing $2,500 on the card.

Applying for a store credit card is entirely up to you. However, it pays to understand that these cards come with downsides. If you really want a traditional credit card with a lower interest rate that can be used anywhere, your best bet is to apply for one. If your credit score isn't quite up to snuff to qualify, there are plenty of steps you can take to give your score a boost.

Ultimately, the best credit cards leave you with more money to tuck away in a savings account each month, build your credit score, and bail you out of emergency situations.