Wednesday, May 31

The Benefits of Retail Credit Cards

Old Navy credit card

If you’re looking for ways to save money at your favorite stores while building or improving your credit history, obtaining a retail credit card may be right for you. Unlike “regular,” or open-loop credit cards, which can be used anywhere that VISA and MasterCard are accepted, retail credit cards are closed loop.

This means that they can only be used at a single store or chain of stores. For some people, retail cards aren’t useful and can actually cause more harm than good. For many, however, the right one can provide benefits like discounts and extra rewards that make them well worth it.

When You Should Get a Retail Credit Card

So, when does it make sense to get a retail credit card? Above all else, you should be prepared to pay off any balance that you generate each month to avoid accruing interest charges. These can be much higher than those of open-loop credit cards.

If you’re a loyal customer and tend to spend a lot of money at a particular store or chain, obtaining a retail card and using it regularly can result in savings. This will come through extra discounts and perks like free shipping and extra time for returns.

However, if you plan on carrying a balance, struggle to maintain a budget or don’t shop at a store often enough, it doesn’t make sense.


People are often attracted to retail credit cards because they are offered special discounts for opening and using them. When paying at the register, for example, you may be asked by the cashier if you’d like to apply for one. They will tell you that doing so will save you, say, 20 percent off of the purchase that you’re making at the time.

Department stores like Kohl’s often offer special sales to customers who use their retail credit card, for example. Some, like Old Navy, reward you with points that can be used to get extra discounts and rebates.

By using an Old Navy credit card, for example, you will earn five points for every $1 that you spend, and those points can be applied to future purchases. When you accumulate 500 points, you are rewarded with a $5 off coupon.

Easy Qualification

For those who are trying to build or rebuild their credit, retail credit cards can be a great alternative to secured credit cards. That’s because they are generally easier to qualify for than open-loop cards. Retailers like to reward loyal customers, so their qualification requirements tend to be fairly loose.

Such cards typically have low credit limits, so the risk is lower for issuers. Your payment history when using a retail card is reported to the three credit reporting bureaus, and this can help you to improve your credit score – just make sure that you pay the balance off every month.

Extra Bonuses

In addition to providing extra discounts and rebates, retail credit cards often provide extra bonuses that reward you further for being a loyal customer. These bonuses can make it well worth it to use the card on a regular basis. Popular examples include:

  • Ability to make returns without providing receipts.
  • Cashback based on money spent that can then be sent to your bank and used for anything.
  • Free alterations at higher-end department store chains, which saves you money and helps you to look more fashionable.
  • Member-only sales that give you access to special savings.
  • Extra time for making returns, which provides you with extra flexibility.
  • Free shipping when ordering products through retailers’ online stores.


Although retail credit cards bring many perks to the table, they aren’t for everyone. There are definite drawbacks depending on the way that you use them.

For one thing, they tend to have higher interest rates than open-loop cards; the average rate for retail cards, 21 percent. This is on the higher end of the spectrum, which is anywhere from 17 to 24 percent on regular credit cards.

Retail credit cards also have low credit limits, which is problematic because charging more than 30 percent of the limit to a credit card can negatively impact your credit, and that’s easier to do with a card that has a limit of a few thousand dollars or less.

Finally, retail credit cards can only be used at one store or chain, but they impact your ability to obtain additional credit and therefore may cause more harm than good if misused.

Choose Wisely and Reap Many Benefits From a Retail Credit Card

Could you benefit from obtaining something like Macy’s credit card or one for another store that you are loyal to?

You might, but that’s only if you plan to pay off the balance every month; are looking to rebuild your credit and don’t qualify for open-loop cards yet; are loyal to a particular store and could, therefore, qualify for many rewards or bonuses. If you don’t meet these criteria, a retail credit card is likely not for you.



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