Whether to use store credit cards vs. major credit cards can be a very personal decision. Store cards have limited reach and may have higher interest rates, but they can give additional perks specific to their store. Standard credit cards may not offer those rewards, but their near universal acceptance and their own benefits could work better for your needs.
Here’s a closer look at how store cards compare to major credit cards, what their pros and cons are, and how store cards can impact credit.
Key Points
• Store credit cards usually have limited usage and higher interest rates compared to major credit cards.
• Store cards offer exclusive benefits and discounts at the issuing retailer.
• Some store cards are usable at locations beyond the issuing retailer.
• Major credit cards are widely accepted at various merchants and locations.
• Major credit cards often have more versatile reward programs.
What Is a Store Card?
A store credit card or retail credit card is a card issued by a store or retailer. There are two main types of store cards — open-loop and closed-loop store credit cards.
• An open-loop store credit card is likely a Visa or Mastercard that simply is co-branded with the retailer’s name and logo, but good to use anywhere those networks are accepted.
• A closed-loop store card, also called a private label credit card, can only be used at the retailer that issues the card.
How Store Cards Works
Open-loop store credit cards are typically Mastercard or Visa credit cards, and they can be used anywhere those payment networks are accepted. While it may be marketed or branded with the retailer’s logo and name, an open-loop store card functions in the same way any other credit card works.
On the other hand, a closed-loop store card is only accepted at the store that issued the card. If you try to use a closed-loop store credit card at any other place, it will be declined.
With either kind of card, you’ll get a statement each month with the charges you’ve made. You’ll be charged credit card interest on any outstanding balance, just like with a general-purpose credit card.
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Pros and Cons of Store Cards
One pro of store credit cards is that they often give perks and rewards that are specific to that particular store. If you frequently shop at a particular retailer, it can be lucrative to get their store credit card. You may also be able to get a signup bonus for applying and being approved for the card. Or you might earn rewards that can translate into a discount on a purchase.
On the other hand, a store credit card can be limiting, especially if it is a closed-loop credit card that you can’t use anywhere else. Many store credit cards also come with higher-than-average interest rates, so it can be wise to pay off your balance in full each month so you can avoid paying any extra.
Store Card vs Credit Card Compared
While there are some important differences between store cards and general-purpose credit cards, they also share some similarities.
Similarities
• You get a monthly statement with a list of all of your purchases.
• You’ll be charged interest on any outstanding balance.
• Payment history and balance information typically reported to the major credit bureaus.
• Open-loop store credit cards and general-purpose credit cards can both be used anywhere the payment network (Visa, Mastercard) is accepted.
Differences
There are also some key differences between store cards and credit cards that you’ll want to be aware of:
• A closed-loop store card can only be used by the issuing retailer.
• You may pay a higher interest rate for a store card.
• The rewards you get will likely only be usable at the retailer.
Here is how these features stack up in chart form:
| Store Card | Credit Card | |
|---|---|---|
| Where they can be used | A closed-loop store card can only be used at the retailer who issues it | Anywhere the payment network (e.g. Visa or Mastercard) is accepted |
| Interest rate | Varies, but often higher than general-purpose credit cards | Varies depending on the card |
| Rewards | Usually limited to discounts or benefits at one particular store | May have more flexible credit card rewards or cash back. |
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Is It Easier to Get Store Cards?
How easy it will be to get any kind of credit card depends on the specific card and your own financial situation. However, it is generally believed that on average it is easier to get a store credit card than it is to get many other major credit cards.
In fact, at some stores, you may even be able to get approved in the middle of your transaction as you check out.
Can Store Cards Impact Credit?
Yes, store cards can impact your credit, either positively or negatively, depending on how you use them. That’s true of all credit cards and is part of how they work.
Just like any credit card, your store card information is also reported to the major credit bureaus (Equifax®, Experian®, and TransUnion®). That means that if you use your store card responsibly, you can help build your credit, while if you fall behind on payments and/or carry a balance, it might have a negative impact on your credit.
Which Is Right for You: Store Card or Credit Card?
Deciding whether a store card or regular credit card is right for you will depend on your own specific shopping habits and overall financial situation. If you frequently shop at a particular store or retailer, you may be able to take advantage of rewards, discounts, or other benefits that come with the store’s credit card.
However, general-purpose credit cards may offer better or more flexible rewards, in addition to having more flexibility in where you can use them.
The Takeaway
Store credit cards come in two different varieties — open-loop and closed-loop cards. An open-loop store card is one that may be branded or marketed as a store credit card, but can be used anywhere the card’s payment network (e.g. Visa or Mastercard) is accepted. A closed-loop store card can only be used at the store or retailer that issues it. While there can be good reasons to get a store credit card, you might be better off with a more flexible credit card that gives cash back or other flexible rewards and may charge a somewhat lower interest rate.
Whether you're looking to build credit, apply for a new credit card, or save money with the cards you have, it's important to understand the options that are best for you. Learn more about credit cards by exploring this credit card guide.
FAQ
Which is better: a credit card or store card?
There isn’t a single right answer as to whether a credit card or a store card is better. Instead, it will depend on your own specific situation. If you are a frequent shopper at a particular store or retailer, it may make sense to open its store credit card and get those rewards. However, if you’re not especially loyal to certain stores, you might prefer to get a general-purpose credit card and earn rewards that way.
Does a store card count as a credit card?
A store credit card can be considered a credit card since you can carry a balance and get charged interest. But keep in mind that only open-loop store credit cards can be used more widely like other major credit cards.
What are the disadvantages of a store card?
While it can make sense to apply for a store card, depending on your financial situation and shopping habits, store cards may come with some disadvantages. Many store credit cards have interest rates that are higher than average, so it can be best to pay off your balance in full each month to avoid those steep charges. Additionally, closed-loop store cards can only be used at the retailer that issues them, which makes them less flexible.
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