Store-branded credit cards are credit cards that are associated with a retailer or chain of stores. They're usually partnered with a credit card issuer, like Capital One, Citi, or Chase, and earn rewards on purchases made with the retailer.
In truth, these cards are notorious for their high interest rates, low credit limits, and lackluster rewards programs. Many are closed-loop, meaning they can't be used on purchases outside of the retailer with which they're affiliated. The general advice has been to stay away from them, as they tend to charm those with low credit scores by offering easy approvals but high APRs.
Lately, however, I've noticed several store-branded credit cards that are giving this class of cards a new look. Many of these cards are issued by Comenity Bank (the card issuer for Bread Financial) and they might be a decent choice for those who shop frequently at the affiliating retailer. If you don't have a store credit card in your wallet, let's see when these cards are worth pursuing -- and when the general advice holds sway.
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Store credit cards are best for loyal shoppers
If you shop regularly or exclusively at one or two retailers, having a store-branded credit card could help you save over the long run. This is especially true if a general-purpose credit card cannot capture that spending with its rewards rates.
Say, for example, that you shop frequently at Walmart. The Capital One Walmart Rewards® Mastercard® earns unlimited 5% back on purchases online at Walmart, including Grocery Pickup and Deliver plus 2% back on purchases in Walmart stores. It also earns 5% back in Walmart stores for the first 12 months as an introductory offer after approval. Since many grocery credit cards don't count Walmart as a grocery retailer, this card could be the most lucrative for Walmart shoppers.
Or how about the outdoor store, REI? If you have the REI Co-op® Mastercard®, you could earn 5% back in rewards on all REI Co-op purchases. Earning 5% in rewards is likely the most you'll earn at REI on a credit card, making this card a must-have for granolas.
Now, this last card brings me to a good point. Many store-branded credit cards earn rewards that can only be redeemed at the affiliated retailer. For instance, the REI credit card doesn't earn 5% in cash back. It earns 5% in REI rewards. So, while that might be okay for REI shoppers, those who are expecting to save money directly on purchases will need to look for a general-purpose cash back credit card.
Some cards, like the Capital One Walmart Rewards® Mastercard®, earn cash back. More often than not, store-branded credit cards are only an extension of the store's rewards program and won't let you redeem rewards as statement credits or cash deposits.
General-purpose credit cards might still be the better choice for many
If you're not interested in earning store rewards, you might be better served by a cash back credit card. In fact, in some cases, a general-purpose credit card could net you more rewards than a store credit card.
For example, the U.S. Bank Shopper Cash Rewards Visa earns 6% back on your first $1,500 in combined eligible purchases each quarter with two retailers that you get to choose. These retailers include Ace Hardware, Anthropologie, Home Depot, Lowes, Lululemon, Nordstrom, Wayfair.com, among several others. Although the card has a $95 annual fee, U.S. Bank waives it for the first year, giving you a chance to try it out before committing.
Another card to consider is the Bank of America® Customized Cash Rewards credit card. This card can earn 3% cash rewards on a category of your choice (you can change bonus categories as often as every month). The card's bonus categories include online shopping. Although this card would require you to shop at your favorite retailers online, it is a way to save money directly on your spending rather than earn store rewards.
Many cash back credit cards also come with high welcome offers and long 0% intro APR periods. While some store credit cards also have welcome bonuses, they're usually not nearly as generous as those offered by general credit cards.
All in all, store credit cards are best suited for those who are committed to the card's underlying retailer, both in spending and in rewards. As long as you don't apply for the card impulsively -- like at checkout -- it could help you save money. Compare it with some of the top credit cards and see which offers you the best value.
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