Published in: Credit Cards | Oct. 31, 2019
By: Dana George
Store credit cards and traditional credit cards are quite different. Here’s a pros and cons list of each.
Credit cards are like European monarchy -- related, but different. There are traditional cards like Mastercard, Visa, American Express, and Discover. These are known as "network cards."
But on a different branch of the family tree are store credit cards like Kohl’s, Target, Lowe’s, and Macy’s cards.
Like an alarming number of royal families, it can be difficult to recognize the differences between traditional credit cards and retail credit cards. (Seriously, have you ever seen a picture of King George V of England and Tsar Nicholas II of Russia? Some things are too closely related to tell apart.)
Here, we outline the similarities and differences between the two most common types of credit cards.
Credit cards are nothing new. In fact, the idea of using a valueless instrument (like a piece of plastic) to represent banking transactions dates back more than 5,000 years to Mesopotamians and their trading practices with the Harappans. Rather than pay with copper or another form of currency, they would present a slab of hard clay, emblazoned with a seal from both civilizations.
Fortunately, we no longer need to carry around a slab of clay -- common network cards consist primarily of a plastic body and a magnetic stripe that weigh in under 20 grams.
The four major credit card networks are Mastercard, Visa, American Express, and Discover, and they're accepted throughout most of the world. That’s not to say that every retailer accepts every traditional card. Businesses can decide which cards work best for them. For example, Costo only accepts Visa, yet Kroger, the nation’s largest grocery chain, won't accept Visa at its subsidiary markets.
The networks that own Mastercard and Visa set the fees that retailers pay when they accept the card, but they don’t have anything to do with fees you pay as a cardholder. Those charges -- including annual fees, late fees, interest rates, and over-limit fees -- are determined by the credit card issuer.
In the case of Mastercard and Visa, the issuers are banks or credit unions. They decide to approve or deny your card application, set the terms of your account, pay for transactions on your behalf, collect your payments, and provide customer service.
When you see a name like Chase, Barclays, or Citibank on a Mastercard or Visa, it refers to the financial institution that acts as the issuer.
The other two biggies, American Express and Discover, play the role of both credit card network and issuer. That means that they not only determine the fees that merchants pay for accepting their cards, but they also set the fees that consumers pay for the privilege of carrying them.
If an earnest cashier hasn't offered you a retail credit card (also called a "store card") lately, you probably haven't been out of the house. Retailers push store cards like crazed Girl Scouts selling Thin Mints. They say you'll receive an immediate discount for applying for a card (provided your credit application is approved) and talk up the benefits you'll receive for being a faithful customer.
Retail credit cards can be a complex web of purpose, promise, and problems:
Credit is great when properly managed. Whether you opt for a traditional credit card, store credit card, or a mix of both, it’s important to make that credit work for you. That means never carrying a balance, using reward points for things you actually need and would have paid cash for otherwise, and saying no to that kind cashier when she offers you a retail credit card you don’t really need.
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