The Best Store Credit Cards and How They Work

Store credit cards are offered by the biggest chain stores as a way to attract more consumers, encourage additional purchases and, ultimately, improve their bottom line. The retailers work with credit card networks like Visa, MasterCard, Capital One, and American Express to create a credit card centered around their business, one that offers perks, rewards, and cashback every time a user spends money in the store.

You can find store cards branded with the names of grocery stores, department stores, online retailers, and more. They tend to have higher interest rates, more limitations with regards to how and where they can be used, and smaller credit limits, but credit score requirements are more forgiving and there are some very useful reward rates on offer. 

With that said, where can you find the best credit cards, which stores offer the most favorable rates and bonuses, how can you apply, and are store cards good or bad? In this guide, we will answer all these questions and more.

How Will a Store Card Impact My Credit Score?

A store card, like all credit cards, impacts your credit score in several ways. However, many of these issues are temporary and minor:

1. Application

A hard inquiry will be placed on your credit report as soon as you apply. This is true for every card you apply for, although you won’t receive this mark until you advance beyond the initial comparison and quote stage. What’s more, the lender is required to warn you when a hard inquiry is about to be placed on your credit report.

Unlike loans and other lines of credit, there is no allowance for “rate shopping” which is when multiple inquiries will count as one if they are made within a short period of time. As a result, every hard inquiry can show on your report and reduce your credit score by as much as 5 points.

2. New Account

All new accounts can impact your credit score in two ways. Firstly, part of your credit score considers whether an account is new or not, and if it is, it will be negatively affected. This won’t have a huge or lasting impact on your score, but it will reduce it slightly. 

Secondly, the overall age of your account will also be considered. The more accounts you have and the older these are, the less likely a new card will impact your credit score as this is based on an average. If you only have one other account and it’s fairly old, a new card will have more of an impact on this aspect of your score, turning an old average into a middling one.

3. Credit Utilization

This is one of the few positive ways that a new store card can impact your credit score. Your credit utilization ratio calculates all your credit and your debt and compares the two. 

If you have two existing credit cards with credit limits of $20,000 and balances of $10,000, you have a credit utilization rate of 50%, because you have used half of your available credit.

When you add a new credit card, you’re throwing an additional credit limit into the mix and, for the first month at least, it won’t show as having a balance, so all of that will be positive. This is key, as credit utilization accounts for 30% of your total credit score.

Don’t get too excited, though, as store cards typically have very low credit limits and as soon as you start making purchases, you may see those benefits disappear.

4. Missed Payments

Of all the things discussed above, credit utilization is the most important as it accounts for 30% of your total credit score, while for new accounts and young accounts it’s between 10% and 15%. However, your payment history is the single most important part of your score and if this is damaged you could undo any positive gains made elsewhere.

Store cards still report to the credit agencies and if you miss a payment, they will find out, your payment history will take a hit and your credits score will suffer. 

The Best Store Credit Cards

We have compared sign-up bonus offers, intro APR rates, cashback rates, and more to find the best rewards card for your needs. All these can help you to save some money at the checkout, but if you’re new to these cards and don’t know how they operate or how to use them safely, make sure you keep reading to learn some essential tips.

Costco Anywhere Visa 

The Costco rewards card is offered by Citi and tailored exclusively to Costco members, whether they are purchasing in the store or at Costco.com. 

At 16.74%, the interest rate is much more respectable than what other store cards are offering and it’s actually one of the better reward cards offered by Citi, with up to 4% savings at eligible gas stations (up to $7,000), 3% at restaurants, and 2% at Costco and Costco.com.

You can also claim 1% cashback on all other purchases, from drugstores to department stores and more. You will need Costco membership to be accepted for this card, but the fact you don’t need to limit your purchases to this store makes it the best store card around, in our opinion at least.

In fact, all things considered, it’s a better option than the specific store cards offered by the likes of Whole Foods, Lowe’s, and countless others, because you can still get 2% cashback at all those stores and you can do so without having a massive interest rate hanging over your head.

Of course, you don’t get all those positives without a few negatives. This rewards credit card requires an impeccable credit score, and unless your creditworthiness is deemed excellent, you may be refused. What’s more, your points need to be spent at Costco, and not as statement credit.

  • Annual Fee: $0
  • APR: 16.74% Regular APR
  • Rewards Rate: 1% to 4%
  • Purchase and Bonus Categories: All Purchases
  • Other: Up to 4% on eligible gas purchases; no foreign transaction fees.

Amazon Prime Store Card

Amazon has a traditional store card and an Amazon Prime Store Card, with cardholders upgraded to the latter when they join Amazon Prime.

Amazon Prime Store Card cardholders can earn 5% cashback on purchases and there is also a $10 bonus offer, with the money added to your account as soon as you join. There are multiple special financing options as well, all of which make this a solid rewards card and a great choice for anyone who spends a lot of money at Amazon.

  • Annual Fee: 0%
  • APR: 27.49%
  • Rewards Rate: Up To 5%
  • Purchase and Bonus Categories: Amazon Store Purchases
  • Other: Free $10 gift card

Walmart Store Card

Earn cashback when you spend money in the Walmart store, on the Walmart app or at Walmart.com. You can use the rewards at checkout and secure anywhere from 2% to 5% cashback depending on the type of purchases you make and whether or not you’re in the intro period.

  • Annual Fee: $0
  • APR: 26.99%
  • Rewards Rate: 2% to 5%
  • Purchase and Bonus Categories: All Walmart purchases.
  • Other: Higher rate during intro period.

My Best Buy Card

The My Best Buy store card offers 5% cashback in the form of a points-based system and this increases to 10% on your first day, which is one of the better credit card offers you will see. There are also multiple discounts, free shipping offers, and other perks, but be wary of the higher interest rate.

  • Annual Fee: $0
  • APR: 26.74%
  • Rewards Rate: 5%
  • Purchase and Bonus Categories: Best Buy Products
  • Other: 10% cashback on your first day of purchases.

Gap Store Card

The GAP store card isn’t as impressive as the Costco Anywhere Visa and doesn’t have the first purchase offer found on the My Best Buy card or the optional extras you can get with the Amazon Prime Store Card. However, if you spend a lot of money at the Gap, it’s well worth considering. 

You can earn five points for every buck you spend at Gap, Banana Republic, Athleta, and Old Navy, and every time you earn 500 points you’ll get a $5 reward card to spend at these stores. There are additional bonuses, discounts, and perks as well, including birthday discounts and special offers for big spenders.

  • Annual Fee: $0
  • APR: 27.49%
  • Rewards Rate: 5 points per $1 spend
  • Purchase and Bonus Categories: Gap, Old Navy, Banana Republic, Athleta 
  • Other: Lots of extra bonuses and cash back rewards

Are Store Cards Good or Bad?

Store cards are like bar tabs for your favorite stores. You add items as you need them without worrying about the cost, and then you pay for them all at the end. And instead of getting a hangover and a prevailing sense of regret at the end of it all, you earn reward points that can be used to purchase even more items.

It’s a cycle of consumerism that provides many benefits to the store and the economy and rewards you for your loyalty. Or, if we adopt a more cynical approach, it’s a cycle that favors everyone except for you; one that exchanges loyalty for debt. Sure, you get a few token perks, but these are designed to make you feel good about your excessive spending, to stimulate the reward center of your brain and encourage you to keep feeding into a cycle that benefits the retailer.

These cards can have their benefits and when used properly they offer the customer some advantages. However, there’s no escaping the fact that they exist for the sole purpose of increasing the retailer’s bottom line and they profit more if you spend money you don’t have and accumulate debt you can’t afford.

Why Do Store Credit Cards Exist?

A store card, like a rewards card, is designed to encourage spending and to convince you to spend more money at a particular store. Imagine, for instance, that you’re looking to buy a television at a department store. You find that TV for $1,000 at a department store out of town, but your local store, with whom you have a store card, is selling it for $1,100. 

If you’re like the majority of consumers, you’ll opt for the later, and the bigger the purchase is, the less you will care about the extra money. It should work the other way, but we’re more likely to go out of our way to save 10% on an item of clothing than we are on a house, for instance. 

It’s almost like our brains register a certain sum of money as “a lot” and don’t take as much notices of price variations, which is why many homeowners won’t care about spending $200,000 instead of $180,000 on the house of their dreams, but will go insane if a retailer suddenly increases the cost of their favorite item from $10 to $12.

Your store card will never earn you enough points to justify that additional $100. In fact, you won’t earn enough points to justify an additional expense of just $20. Let’s assume that you find a card that offers 5% on all purchases. That TV will earn you $55 in reward points, which means you’re paying $100 extra just to get $55 cash back.

That doesn’t make any sense, yet it’s a trap that countless consumers fall into and one that retail store cards rely on. And that’s assuming a fairly high rate. With the exception of intro offers and the high-paying reward cards outlined above, the average reward card actually offers around 1.5%, which means it would only make sense to shop at your local store if that TV was being sold for $1,014 or less.

The retailer might try to convince you that these cards are designed to reward loyalty, but it’s all about encouraging spending and trapping you into a cycle of consumerism.

How to Use Store Cards Properly

Store cards make their money via financing options, and by charging high variable APR, penalty fees, and more. The idea is that you purchase something you wouldn’t otherwise have purchased, and because you can’t afford to meet the repayments, the card traps you in a cycle of debt.

To avoid being beaten by a retailer and their tempting offer, you need to:

  • Use Your Favorite Stores: There’s no point signing up for a card just to make a single purchase. Unless it’s one of your favorite stores, one where you spend a lot of money and shop regularly, the card likely won’t provide you with many benefits.
  • Compare to Reward Cards: Most of the time, you will be better off with a rewards card. You may be offered a regular APR, low fees, and a host of other benefits alongside a better cash back rate. Don’t assume the store card you’re being offered is ideal just because you like the store. Check the rates, terms, and bonuses, and compare it to popular rewards cards and cash-back credit cards to see which is better. For instance, the Chase Freedom and Discover It cashback cards are generally much better than any store cards, although you may need excellent credit to apply.
  • Check the APR: The APR is often much higher on cashback cards and store cards are no exception. In fact, many of these cards offer the highest possible rates. Some will tempt you in with an intro APR, only to hit you with a higher rate after 6 to 18 months. Pay close attention to these rates to avoid being stung.

Pay Your Balance: Reward cards, and all credit cards for that matter, profit when you struggle. They earn most of their money when you don’t repay the balance at the end of the month, as this allows them to initiate interest charges. By only getting cards when you know you can clear the balance and doing all you can to make it a reality, you can avoid being hit with high fees and rates.