Types of store credit cards
There are two types of store credit cards:
Closed loop
A closed-loop store credit card can only be used with that specific retailer. For example, a closed-loop Target card will only work for purchases at Target and on Target.com. You can recognize this type of store card because it doesn't have any payment network, such as Visa or Mastercard, stamped in the corner.
Open loop
An open-loop store credit card is part of a major payment network, typically Visa or Mastercard. It can be used anywhere that payment network is accepted.
An open-loop store credit card is much more useful, since you can pay with it anywhere that type of card is accepted, just like with a regular credit card. There are also good closed-loop store cards available, but they're more limited. You'll need another card for your spending everywhere else, outside that store.
Should you get a store credit card?
You may want to get a store credit card if you shop at a store multiple times per month. A store credit card can also be a good choice when you want to build credit. Many are available to applicants with lower credit scores, so you could get a store credit card with fair or bad credit.
Outside of those situations, make sure to consider all your card options. In most cases, store cards don't offer nearly as much value as the best credit cards, but there are some exceptions to the rule.
How to maximize your rewards with a store credit card
Follow these tips to maximize rewards with a store credit card:
- Always use it when shopping at the store and on its website. Most store cards offer extra rewards on these purchases. Keep your store card in your wallet so you have it whenever you visit that merchant. Don't forget to use it for online shopping, too.
- Put your regular purchases on your store card. If you have a store card that works anywhere, use it to pay for your normal expenses. This is one of the big advantages of open-loop store credit cards.
- Take advantage of sign-up bonus offers. If your store card offers an introductory bonus, check the terms and make sure to complete them. A common sign-up bonus is a discount on your first purchase with the card. With that type of bonus, try to use it on a big purchase you were going to make anyway to maximize your discount.
- Decline special financing offers. Your store card may give you the option of zero-interest financing on purchases. You can either earn rewards on a purchase or finance it, but not both. To earn more rewards, don't accept any financing offers. These offers can also be costly if you don't pay off the full balance on time. They typically have deferred interest, meaning if a balance remains after the offer ends, you're charged the full amount of interest going back to the original purchase date.