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If you’ve ever been shopping at a major retailer, you’ve probably had a cashier offer to sign you up for a store credit card with the promise of saving you money on your purchase. These offers are hard to miss because most stores are trying to meet a quota of new credit card sign-ups, and cashiers are required to offer them to you. Some of the sign-up discounts can be pretty appealing, as can the regular rewards, but should you sign up for a store card just to get a discount? 

One Time Discounts vs. Regular Rewards

Some stores offer a percentage off your first purchase, typically 20% or 30%. Others may offer a flat rate discount off of a minimum purchase amount. 

For example, the Target Red Card comes with $40 off your first $40 or more purchase, upon card approval. Occasionally, store credit cards may offer a 0% APR introductory period in which all purchases made during that time can be paid back with zero interest. 

In addition to a sign-up bonus, store credit cards may also have a recurring reward program that offers incentives for regular purchases. Cashback for eligible purchases is a standard reward, as are point systems that convert into cash savings.

For example, Walmart offers 5% cashback on any purchase made through the website or app, 2% in stores and 1% on purchases at other stores where Mastercard is accepted.

One Time Discount

  • A percentage off your first purchase
  • A flat-rate discount, typically off a minimum purchase amount
  • 0% APR introductory period

Regular Rewards

  • Cashback 
  • Points

Is Getting a Store Credit Card for a One Time Discount Worth It?

Probably not. There is no one-size-fits all answer, but in general, the amount you’ll save opening one store credit card may not be worth everything you’ll need to do to make sure the card doesn’t cost you money in the long run. 

Applying for Store Credit Cards Affects your Credit Score

Let’s not forget that even if you aren’t accepted for the store card, the hard inquiry required to apply can affect your credit! Count on your score, dropping a few points whether or not you are accepted for the card. If you have a solid score and haven’t taken on new debt recently, losing a few points on your score might not be a big deal to you. 

On the other hand, if you apply for lots of store cards in a short time frame, expect a more significant dent in your credit. We definitely don’t recommend opening multiple store credit cards at the same time. This slippery slope can land you in hot water if you don’t follow through with paying off each card in a timely fashion. 

The benefits seldom outweigh the cost and headache of tracking down all of your accounts to resolve them after your shopping spree. 

New credit lines also change the architecture of your credit profile. They lower your accounts’ average age and give lenders the impression that you are an inexperienced borrower. Your credit lines’ average age makes up 15% of your credit score in most scoring models.

Store Credit Cards Test Your Follow Through

When you are in a store making a purchase, the temptation to save money on all of the goodies you found can lead to an inflated sense of optimism about how you’ll manage the new card when you get home. You probably think, “saving 20% on my purchase today is a no brainer because i’ll just pay it off right away!” Unfortunately, that resolve weakens once you leave the store and are presented with distractions that can cause you to forget “the plan.” This is especially true if you are in the midst of a busy holiday season. 

Stores rely on the fact that you are busy and may forget to pay-off your balance right away. 

If your balance carries over from one month to the next, you’ll pay interest on your credit. If you forget to set up payment on the card, you’ll also pay a late fee. A few months of this and the amount you saved with your “one-time” purchase becomes obsolete. 

Store Credit Cards Tempt You To Spend More

The only reason stores offer discounts and reward on cards is because they understand that available credit burns a whole in consumer pockets. These cards raise your temptation to buy more than you would if you were paying cash. It’s not uncommon for the promise of a discount to tempt you into spending much more than you planned to. 

For example, if you think you are saving 30% on your purchase, you might pad your order with things you don’t need, ultimately causing you to outspend what you would have saved.

Is Getting a Store Card for a Regular Discount Worth It?

Maybe. If you get a store credit card somewhere that you already shop regularly, the reward system could save you money in the long run. However, it’s essential to be realistic about how often you plan to use the card to determine if the benefits outweigh the cost of maintaining it. 

Getting a store credit card is rarely a good reason to change your regular spending habits. 

Don’t feel pressured to shop at a store more often simply because you have a credit line there. If you do decide to switch up your routine and buy more often from a particular store because of their credit card rewards, make sure to compare prices to what you were paying before. 

For example, if you decide to switch from a local grocery chain to Whole Foods because your Amazon credit card offers you 5% cashback on those purchases, the higher prices at Whole Foods could outweigh what you are getting in cashback rewards. Alternatively, if you already shop at Whole Foods regularly, the cashback reward could be a good fit for you. 

Retailers in competing markets often offer store credit card options and sign-up bonuses to entice consumers to switch to their stores. This can work to your advantage. Both Walmart and Target offer store credit cards, as do Home Depot and Lowe’s. 

For example, you might decide to shop for household products at Walmart instead of Target to take advantage of Walmart’s credit card rewards. It bears repeating that you should always price check products before making a switch to make sure you are getting a deal.  

Pay Attention to Interest Rates and Fees

Most store credit cards do not have annual fees. This is a good thing, especially if you don’t plan to use the card very much. However, you should still thoroughly review all of the card terms, especially interest rates and fees. Pay attention to how much interest is charged on a revolving balance. Store credit cards are notorious for interest rates at the upper limit of what is allowed by law, even if you have good credit. You’ll also want to keep track of things like late fees, cashback fees, and international transaction fees. 

Aside from accidentally missing a payment, you can also incur late fees if you don’t update your automatic payment amount to pay the minimum payment on the current balance. For example, if you recently increased the card balance but forgot to increase your payment amount to cover the new minimum payment, your account will be considered past due and you’ll be dinged with a late fee. 

Some store credit cards also have fees for cashback or international transaction options, so pay attention to those if you plan to use those features. 

Don’t Treat Store Credit Card Sign-Up Offers as Coupons

Applying for a line of credit is a commitment. It’s not a good idea to treat a store credit card sign-up offer as a one-time discount. Unless you plan to make an enormous purchase and save a significant amount of money by signing up for a credit card, save yourself the hassle of managing a new card that you really don’t need. If you decide to take advantage of a discount on a one-time purchase, you’ll have to be diligent about paying off the balance and closing the card to ensure it doesn’t cost you money down the road.

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