- Store credit cards are often offered to consumers with promises of a discount.
- They generally have inferior rewards programs.
- They also charge higher interest rates.
Do you have them in your wallet?
Credit cards sometimes get a bad reputation, but the reality is that they can be a helpful tool and most consumers should have at least a few cards in their wallet.
That's because credit cards can help you earn a good credit score and can also reward you with points, miles, or cash back just for purchasing things you have to buy anyway.
But while it's a good idea to have at least one -- and sometimes several -- credit cards, there is one type of card that's not usually worth having: store credit cards.
What are store credit cards?
Store credit cards are credit cards that can only be used at a particular shop. They are different from co-branded credit cards, which are cards issued by a major bank that has partnered with a business to offer a card that carries its name.
Co-branded cards can be used with any retailer or service provider, rather than just for purchases with the brand named on the card. These types of cards generally offer more rewards for shopping with the company that carries the card's brand. But the rewards often don't have to be redeemed with that particular business and points can still be earned when using the card elsewhere.
Store cards, on the other hand, can be used only at the store that issued them. And rewards earned are generally also redeemable only at that store as well.
Why are store credit cards the worst card type?
Consumers are often offered store credit cards at the register when they go to pay for a purchase. Usually, there's some incentive such as 10% off. But while this may seem attractive, most consumers should avoid opening store cards because there are numerous reasons they aren't all they are cracked up to be.
Store cards typically charge higher interest rates than the cards that major banks offer. Since credit cards are already notorious for charging consumers a fortune in interest if they carry a balance, this is especially bad news for people who might not be able to pay off their credit card bill in full when it comes due.
Store cards are also pretty weak when it comes to rewards in most cases. The value of any reward offered is usually well below that of standard cards issued by major banks, and since you usually only earn rewards when shopping at the store that issued the card, it can take you forever to actually get enough rewards points to do anything with.
When you earn rewards, you may also have few options for what to do with them. It's common for you to be required to redeem them with additional spending at the store, which means that instead of getting rewarded with free money to use as you'd like, you often end up having to spend more just to redeem your rewards. Rewards from store cards could potentially also expire before you get to use them.
If you don't want a costly card with an inferior rewards program you can only use in a few places, you should definitely steer clear of store cards. There are plenty of better credit card options to consider instead.
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