Are Department Store Credit Cards A Good Idea?

Brendan Harkness

Brendan Harkness | Reviews

Dec 30, 2015

Department store credit cards can help save you money over time, and they may offer some nice perks too, but are they a good idea?

The answer is: it depends on the credit card you’re talking about, and your own personal shopping habits.

Credit cards come in many shapes and sizes, and some are obviously better than others. Some have better rewards, or better customer service. And some cards have details in their terms that you may not realize or fully understand until they come back to cause a hassle.

In many cases a regular rewards credit card will be your best bet, letting you earn points or cash back and providing benefits anywhere you want to shop.

If you’re wondering if you should apply for a department store credit card, you’ll need to figure out if it will actually provide you with a better deal than the other credit cards out there.

Read on to learn more about these cards, and to see if you might be better off with a general-use rewards credit card.

What Are Department Store Credit Cards?

Many stores offer credit cards for their customers, providing reward points, financing deals, discounts, member-only offers, and other benefits. In some cases these cards can offer some great deals, but you’ll want to check the terms carefully before applying for any store cards.

Some cards can only be used at the store, while others can be used anywhere. Most of the big department stores offer cards like these.

Let’s take a look at a few examples, and then we’ll think about how valuable these cards are.

Walmart Credit Card

The Walmart Credit Card is available as a basic store card but there’s also a MasterCard version which can be used anywhere. Both cards provide a small discount on a single purchase and special financing deals that you can use to to pay off large purchases over time, at no interest (as long as you pay them off in time).

The MasterCard also provides 1% cash back on every purchase you make.

Macy’s Credit Card

The Macy’s Credit Card, and the companion American Express version, provide more/better benefits as you spend more money at Macy’s. Cardholders will get a discount on their initial purchases with the card, several additional discounts throughout the year, and a special treat on birthdays.

There are quite a few other perks to enjoy as well, making this one of the more useful department store credit cards.

Kohl’s Credit Card

The Kohl’s Credit Card, called the Kohl’s Charge Card, is another one of the better department store cards available, thanks to the frequent discounts it provides. Customers get two fairly substantial discounts to use initially, but will then get at least 12 mailings throughout the year containing discounts of 15% – 30%.

If you spend at least $600 per year at Kohl’s with the card, you’ll become a Most Valued Customer and get at least 6 more discount mailings per year. These discounts, and the ability to earn more by shopping more, mean that this card could be a definite asset for frequent shoppers.

If you’d like to learn more about some of the better store cards available, check out our picks for the Best Store Credit Cards for 2015.

Are Department Store Credit Cards A Good Idea?

Low Limits, High Rates

The main problem with store credit cards is that they usually have low credit limits along with high interest rates. This means that you won’t be able to spend very much with the card before paying it off, and you’ll be dealing with large interest charges if you carry a balance from month to month. This fact about store cards means that they are also more easily available to people with poor credit, which is a good thing as long as the cards are used responsibly.

You can get around this problem by paying off your balance in full each month (which is always a good idea for any credit card) but it definitely makes store cards less convenient. If you do end up paying interest, the charges for large balances will eat into the discounts and benefits you gain from the card. General-use cards, on the other hand, tend to offer cardholders larger credit limits and lower interest rates.

“Special” Financing Deals?

Another very important fact: the special financing deals that you’ll find on many store credit cards, like the Walmart card above, have a condition that is easy to miss. These deals let you pay off a large purchase at 0% interest for a specified period of time, say 6 months. You’re supposed to make payments each month until the purchase is paid off.

In most cases, if you fail to pay back the entire purchase by the due date you’ll be charged interest going all the way back to the purchase date. This would mean you’d end up paying quite a bit more than the regular purchase price, in addition to being charged late fees and potentially hurting your credit. These special financing deals are actually not a very good deal compared to what you can get with other credit cards.

General-use rewards cards do not normally have terms like that, and they often come with 0% introductory interest rates that you can make use of anywhere you shop. These intro rates don’t last forever and you still need to make regular minimum payments on the balance, but you won’t be penalized for taking a while to pay off your purchases.

Finding The Right Store Card For You

Store cards, including department store cards, are generally only a good idea if you shop at that store frequently, and will make use of the store-specific benefits that their card provides. The better cards offer points or frequent discounts, like the Kohl’s card, while the less valuable cards offer the financing deals.

To figure out if one is right for you, take a look at your shopping habits and the benefits that the card provides: will you use the card often? can you take advantage of most or all of the perks that the card provides? are you going to pay off the balance every month, or are you prepared to deal with interest?

If you can’t say “yes” to all of those questions you’ll be better off with a general-use rewards credit card, which you can use to get rewarded everywhere you shop. Take a look at our Rewards Credit Cards page, where you’ll find our picks for the best cards available today.

Video: Store Credit Cards – 3 Things You Should Know Before You Apply

Watch our quick video for an overview of the important differences between store cards and other credit cards, with tips for figuring out if one might be right for you:

Insider Tip: A Macy’s card was my first one ever, and I got it long before I knew anything about credit cards. It gave me a little discount but then I forgot about it, and I ended up with a late payment. That was my own fault – don’t let the same thing happen to you!

Getting The Most Out Of Department Store Credit Cards

So, if we take what we learned about department store credit cards, we can see that they might be a good fit if you find yourself in a position like this:

  1. You shop at the store in question frequently
  2. You fully understand the terms of the card (this means knowing what you’ll have to pay and when, as well as the complete set of benefits you’ll get)
  3. You are prepared to pay off your balance on time, preferably before you accrue interest
  4. You did some research, and there are no general-use rewards cards that offer the same or better terms

If you meet these criteria, a store card may be right for you. The first 3 items can be fairly easy to figure out, but number 4 will take a bit of research.

Take some time to browse our page on Rewards Credit Cards, where you’ll find more information about what makes a good card stand out, how to use them, and our picks for the best rewards credit cards available today.

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