What is a Store Card? A Look at Brand-Specific Credit Cards and Their Limitations

We’ve all been standing in the checkout line at a retail store when an associate asks: “Do you want to sign up for our store card?” No matter what your answer is (mine is always “No, thanks”), no one has time to read and understand the terms of the card while getting the death stare from all the other customers in line. 

So I’ll save you some time. A store card is a brand-specific credit card that offers incentives (like discounts and rewards) for shopping with the issuing retailer or a network of retailers. Although a store card is a credit card and can often be used anywhere, it may have some limitations and requirements that traditional credit cards don’t. 

Store cards are branded credit cards that incentivize shopping with a certain retailer or group of retailers. Some may even be closed-loop, which means you can only use them at certain stores.

If you understand how a store card works and how to manage it responsibly, it could be a nice addition to your wallet. I can say “No, thanks” to most store cards because I understand their conditions — and I haven’t found the right retailer yet. Once you learn about their benefits and drawbacks, you can confidently (and quickly) decide the next time you’re faced with the option to sign up for a store credit card. 

I’ve definitely signed up for a credit card without fully understanding the details. But I know you won’t judge me for skipping the fine print — it’s often too long and takes way too much time to read. 

But understanding your card’s terms and conditions is actually quite important. Below, I’ll summarize the basics of how store cards work so you can understand what they are in plain terms, not legalese.

Who Issues Store Cards

If you’ve ever had a credit card, you probably know the top dogs of the credit industry, such as Capital One, American Express, and Chase. 

But you may be wondering who exactly sources the cards you see at your favorite retailers. Most store cards have the retailer’s name printed on the front, sometimes accompanied by a Visa or Mastercard symbol.

So it may be easy to think the retailer issues its cards all by its lonesome. But the truth is retailers create partnerships with financial institutions, such as banks, to issue their cards. 

For example, Best Buy partners with Citibank to create and provide its store cards, including its My Best Buy Credit Card. Citibank also works with Costco to distribute its brand-specific cards.

Here are a few examples of store cards that are popular among shoppers:

• Costco Anywhere Visa® Card by Citi: To sign up, you are required to have a Costco membership and excellent credit. Benefits include 2% cash back on Costco purchases, 4% on eligible gas and EV, 3% on travel and dining, and 1% on everything else. 
• Target Circle™ Credit Card: Benefits include a discount on eligible Target purchases, a special discount on your card anniversary, free shipping, and 30 extra days for returns.
• Amazon Prime Visa: Only available to Amazon Prime members. Benefits include 5% cash back on all Amazon.com and Whole Foods purchases, 2% back for dining and gas, 2% back on local transit and rideshare, and 1% back on all other purchases.

Customers can apply for store cards online or in store during their shopping experience. Retailers tend to promote their cards before (in cart online) or at checkout, offering you an incentive to sign up and purchase with the card. These usually include things like an immediate discount on your purchase or promotional financing deals for big ticket items.

Typical Credit Limits and Usage

Retailers offer store cards to encourage customers to shop with them. Ironically, these store cards also tend to have lower credit limits than traditional credit cards. 

Store cards come with specific credit limits determined by the issuer. Credit limits can be based on the applicant’s creditworthiness, but most store-branded cards start with relatively low limits and don’t exceed $3,000, even as your available credit increases based on your creditworthiness. 

Many store credit cards are closed-loop, meaning you can only use them at the issuing retailer. But quite a few store-branded credit cards, including some of those listed above, have an open-loop structure. Open-loop cards are general-purpose and can be used to purchase anywhere that brand of card is accepted. 

If your store card is closed-loop, it can severely limit your range of purchases and usage. In some cases, you can only use it at the store that issued it to you. 

The Application Process

I’ve participated in plenty of holiday gift rushes and have heard the store card application pitch a million times.

Store card offers are synonymous with the holiday season for me, and I have the dialogue memorized: “Do you want to save X% and sign up for our card today?” But that’s only how the process goes in store. 

You can also receive store-branded credit card promotions online and through mail-in forms. Regardless of the method, completing the application is simple. Retailers have the process perfected, so you can shop to your heart’s content without waiting a second too long. 

The application process usually starts during a transaction and involves providing personal information, financial details, and consent for a credit check. Information you’ll need includes your Social Security number, birth date, mailing address, income, and employer details. 

It will only take a few minutes to complete the application online or in store. 

When you’re faced with the option to apply for a store credit card, you may assume it has the same structure as traditional credit cards. However, these card types differ even on the basic functioning level.

No one wants any surprises when shopping. So in this section, I will compare store cards with general-purpose credit cards to help you understand the differences and decide which card type is better for your needs. 

Acceptance and Flexibility

One of the major ways store cards and general-purpose cards differ is in flexibility. 

General-purpose cards are not merchant-specific like store cards, which means they are more widely accepted both online and in store. For example, you can use your general-purpose card to buy groceries at Walmart and to fill your tank at the pump at Chevron. 

Many store cards offer extra incentives to shop at certain stores, while general purchases don’t earn extra benefits. Some store cards are also limited to the issuing retailer and its affiliates. That means your store card won’t be accepted anywhere other than the store you got it from. Some store cards can be used within a network of retailers. 

For example, the TJX Rewards Platinum Mastercard allows shoppers to make purchases and earn rewards at the TJ Maxx family of stores, including TJ Maxx, HomeGoods, and Marshalls.

Traditional credit cards and open-loop store credit cards certainly win in the versatility department, allowing you to shop anywhere you want. So if that is important to you, a general-purpose store card may better suit your needs. 

Rewards and Benefits

You may think promotions for credit cards are at an all-time high during the holiday season. But the benefits don’t stop when the clock strikes midnight on the new year. 

General-purpose and store cards both offer excellent rewards and benefits programs. Their respective rewards programs, however, vary in range and value. 

Store cards typically focus on rewards and benefits specific to the issuing retailer. You can only earn rewards on purchases made at your issuing retailer’s store, and those rewards are usually limited to that retailer as well. 

On the other hand, many general-purpose cards offer broader rewards programs, with benefits that include travel points and cash back. General-purpose cards encourage use since you can maximize your earnings and rewards the more you shop with your credit card. 

You are less limited with general-purpose credit cards, which means you can shop with more freedom and earn rewards on more product categories and at more locations. 

A store-branded credit card can still be a great choice if you’re a loyal member and shop at your issuing store regularly. That way, your frequent use can bring in more rewards. 

Interest Rates and Fees

Interest rates are never a fun topic to discuss but are essential to the making of your credit card. Understanding them will help you make the best card choice and maintain your financial health. 

While all credit cards carry interest rates, they vary in range. Where you fall in this range depends on your creditworthiness. 

With general-purpose credit cards, your issuer will use your credit history to determine which interest rate to attach to your account. The better your credit score, the lower your interest rate will be.

Some store cards, however, tend to have higher interest rates. 

Higher APRs can impact your finances if you carry over balances. So if you sign up for a store credit card, you should only purchase what you need and pay off the full balance by your payment due date. 

Signing up for a store card can be particularly alluring when you have a lot of things to buy. But understanding whether the card will fit your needs long term can stop you from making an impulsive decision you may regret later on. 

Weighing the pros and cons of any service allows you to make the best decision with a clear mind and all the facts. Of course, it’s the same with credit cards. 

Below, I will highlight the advantages and disadvantages of using store cards, so you can determine whether applying for one will work for you. 

Store cards’ benefits include:

• Exclusive Discounts are typically the first thing you receive after signing up for a store-branded card. Retailers often offer an exclusive discount as an incentive for applying for the card. They also provide special discounts along the way, allowing you to save a certain percentage on eligible purchases. 
• Rewards Programs encourage cardholders to use their store card to shop at the issuing retailer’s store so they can earn cash back or other benefits. You can earn points and redeem them to save on purchases. 
• Special Financing Options are another benefit that issuing retailers offer with their store cards. Let’s take the Lowe’s store card, for example. Lowe’s allows customers to finance products, such as appliances, for up to 12 months with its special financing option. You may have to choose between the rewards program or the financing option, however.  

Store cards also have potential downsides to consider, such as high interest rates, limited usability, and impact on credit scores.

I’ll list a few drawbacks below:

• Possible High Interest Rates: Most store cards have high APRs. On average, their interest rates are higher than traditional cards, with many sitting above the 30% threshold. 
• Limited Acceptance: Some store cards are not widely accepted. You can only make purchases with closed-loop store cards at the issuing retailer’s store or its network of brands. This also means you can only leverage your rewards at that retail store. 
• Low Credit Limit: Store cards’ credit limit typically doesn’t exceed $3,000. Although this may not seem like a problem, it can spell trouble for your credit score. Credit utilization is a significant factor in calculating credit scores. So if you use up a good chunk of your credit limit, which can be more easily done with lower credit limits, it can affect your score.  

When considering a store-branded card, you can use these factors to determine whether the card will be a good fit for you and your financial lifestyle.

Since store cards are also credit cards, they can impact your credit score and history. Managing them responsibly will allow you to maintain your financial health and avoid debt. 

Below, I’ll offer tips and best practices for managing your store card, so you can shop without worry and keep your credit history at the same time.

Paying Entire Balance Monthly (If You Can)

A store credit card can be a valuable tool. Its benefits can enable you to increase your savings and give you easy access to credit that doesn’t include strict application processing. 

But its drawbacks can erase any good it has to offer. Handling your store-branded card with care can help you avoid the effects of these drawbacks. 

There are a few habits you can add to your financial routine to help you use your store card responsibly. And one of those habits is paying your entire balance off monthly. This may not be possible every month, but aiming to pay your full balance monthly can lead to great results. 

When you pay your full balance every month, you can avoid the high interest charges that come with having a store card. Failure to pay off your balance can lead you to accumulate unwanted debt that will become harder to pay in the future. 

I recommend setting up automatic payments to help ensure timely payments. Automatic bill pay can also help you avoid late fees, which will only compound the impact of high interest charges. 

Timely payments play a large role in your credit score rating, so keeping up with your store card’s payments will help you maintain a positive rating.  

Monitor Your Account Activity

Another important habit to instill is monitoring your account activity. Keeping an eye on your financial activity can help you discover things about your financial standing and behavior that you wouldn’t know otherwise. 

Monitoring can also allow you to spot things that aren’t supposed to be on your account. By regularly checking your account statements, you can identify unauthorized charges or errors on your store card. This way, you can dispute the error and get your account in the right again. 

Store cards often don’t have high credit limits. So you can end up using a lot of your available credit quickly. Checking your credit limit and the amount you’re using can show you how to approach your spending going forward to keep your credit history in good standing. 

I recommend using any online account management tools the card provides to track your spending and rewards. These tools make monitoring and managing your account activity simple and effective, so you can use your rewards when needed and keep your account in balance. 

Understand the Card’s Terms and Conditions

The words “terms and conditions” may immediately bring a snoozefest to mind. But trust me, their benefits can be life-changing. 

Familiarizing yourself with a card’s interest rates, fees, and rewards structure can allow you to avoid major financial pitfalls and choose credit cards that can help you and your credit history in the long run. 

The rewards structure should outweigh the downsides of interest rates and fees. You should also feel comfortable with the interest rates, so if you do carry a balance, you can pay it and the interest charge without trouble. 

I recommend memorizing your promotional financing terms and their expiration dates. Deferred interest promotions can sometimes lead to unexpected interest charges if you don’t pay off the balance on your financed product in time. 

The incentives that come with store credit cards can often be too enticing and valuable to pass up. But if you’re not a loyal shopper, some of those benefits and incentives may fall flat. 

To get the most out of your store card, you should at least be a regular shopper with a specific retailer or a network of retailers — even if the card is open-loop. Then you can use exclusive discounts, rack up points over time, and redeem them to make purchases at your issuing retailer. 

I hope you’ve gained a better understanding of store cards, their terms, and how they work. So next time you’re at a checkout and offered a card, you’ll have all the information you need to say “Yes” or “No, thanks.”