Key takeaways
- Store credit cards typically offer brand-specific benefits and perks, but they can be used only at the associated retailer or chain.
- Co-branded cards also feature brand-specific benefits, but they are associated with a card network like Visa or Mastercard and can be used anywhere the card network is accepted.
- It’s often best to pair a store credit card with a traditional credit card if you want to maximize rewards and cardholder benefits.
If you’re trying to build credit or you want to secure some benefits at your favorite retailer, you may be tempted to apply for a store credit card. You’ve likely heard the spiel at the checkout counter: “Would you like to open a credit card with us today? You could save 15%!”
The cards are typically easier to qualify for than traditional credit cards, and you can often get approval on the spot to use the card for a purchase. The trade-off? Store credit cards often can be used only at a limited number of places, and they tend to have low credit limits along with sky-high interest rates.
If you’re considering a store credit card, read on to learn more about how these cards work, what their limitations are and how to make the most of them.
What is a store credit card?
Store credit cards -- or retail cards -- are typically closed-loop credit cards, meaning they can be used only to make purchases at a specific retailer or family of brands. You can usually identify a closed-loop card because it bears the name of the merchant but no card network logos, like Visa or Mastercard.
Almost all store cards offer rewards or discounts with their affiliated stores or brands. Some also come with added benefits for cardholders, like improved return policies or access to special sales events. However, store cards typically have lower credit limits than traditional credit cards, and their rewards can often only be used for redemptions within the brand.
Take a look at the Kohl’s Credit Card*, for example. By using the card to make purchases at Kohl’s, you can qualify for an elevated rewards rate, exclusive discounts, free shipping on eligible purchases and other perks.
However, since it’s a closed-loop card, you can use the credit card only at Kohl’s -- you can’t use it to make purchases at other businesses like gas stations, grocery stores or restaurants.
What is the difference between a store card and a co-branded credit card?
A co-branded, or open-loop, credit card is associated with the brand but is issued in partnership with a payment network like Mastercard or Visa. Instead of being restricted to just one brand, a co-branded card can be used anywhere its payment network is accepted.
You can identify a co-branded card by looking for a payment network’s logo on the card, in addition to the brand.
Co-branded credit cards can be affiliated with more than retailers and are often partnered with travel brands that have their own rewards programs. These co-branded travel cards let users earn travel rewards with the airline or hotel they’re tied to and qualify for brand-specific travel benefits.
Co-branded credit cards affiliated with retailers often offer similar benefits as a closed-loop store credit card, and many retailers offer both versions -- Amazon, for instance, offers both a closed-loop Amazon credit card and the open-loop Prime Visa.
Think of the open-loop store cards as a bit of a hybrid between a closed-loop store credit card and a traditional rewards credit card. You get the convenience and utility of being able to use your credit card for regular purchases, but you can also get special perks and rewards from your favorite store.
In addition to the Amazon Prime Visa, here are some examples of co-branded credit cards, including retail and travel:
- Apple Card*
- Capital One Walmart Rewards® Mastercard®*
- Citi® / AAdvantage® Platinum Select® World Elite Mastercard®*
- Costco Anywhere Visa® Card by Citi*
- Delta SkyMiles® Gold American Express Card
- Hilton Honors American Express Card
How to maximize the value of a store credit card
While store credit cards may not offer as many lucrative options as the best rewards credit cards, there are steps you can take to maximize their benefits:
- Use your card in-store for special discounts. Using a store card is the best way to secure special discounts and boosted rewards for purchases within the brand. You may even qualify for perks like free shipping or special shopping events.
- Pair your store card with a rewards credit card. While store cards can get you discounts and rewards with that specific retailer, you can maximize your earnings on other regular purchases by using traditional rewards or cash-back credit cards. A traditional card will also offer more flexibility when it comes time to redeem rewards.
- Pay your store card balance in full each month. Store credit cards tend to have high interest rates that can make carrying a balance costly, and their low credit limits can make it easy to raise your credit utilization ratio quickly, which can hurt your credit score. Strive to pay off your store credit card in full shortly after you make a purchase.
The bottom line
While store credit cards are fairly limited in how you can use them, they do have their benefits. They’re often easier to qualify for, and they let users earn rewards and access special perks while building their credit with responsible use.
However, a closed-loop store credit card shouldn’t typically be your only card since you can’t use it for purchases outside its brand. Pairing a store credit card with another rewards credit card from a major credit card issuer can help you earn more valuable rewards and have more flexibility overall.
FAQs
Closed-loop store credit cards work only within a single retail store or family of stores. However, open-loop store credit cards, also known as co-branded cards, can be used anywhere their payment network is accepted.
Closed-loop store credit cards work only within a single retail store or family of stores, while regular credit cards that feature the American Express, Discover, Mastercard or Visa logo can be used anywhere each respective card is accepted around the world.
Store credit cards can be worth it if you want to qualify for in-store promotions and discounts with your favorite retailer or if you want to earn a better rewards rate in a store loyalty program.
*All information about the Kohl’s Credit Card, Apple Card, Capital One Walmart Rewards Mastercard, Citi® / AAdvantage® Platinum Select® World Elite Mastercard® and Costco Anywhere Visa Card by Citi has been collected independently by CNET and has not been reviewed by the issuer.
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