The Target RedCards – which include the Target Visa, the Target credit card and the Target debit card – offer an immediate 5% discount on almost all store purchases. Since you can buy damned near anything at Target stores, from clothes, to home furnishings, to produce, this can be one of the most lucrative rewards programs around.
At the moment, they aren’t offering the Visa to new applicants, but the credit and debit cards can still be used to earn big cash back bonuses. Even though they can only be used for in-store purchases, Target sells so much stuff that you can effectively earn 5% on most of your purchases, beating even the best cash back credit cards.
The only real consideration is whether the Target credit card is the right choice for you, or if you should stick with the rewards debit card.
5% off at the register. Period.
The RedCard discount includes pretty much everything except prescriptions. Even then, if you use your RedCard to get 5 prescriptions filled, you earn an additional 5% off one day’s purchases, for a total of 10%. The credit card earns discounts online, while the debit card can’t be used online at all. In addition to the discount, Target donates 1% of your purchases to the K-12 school of your choice.
The best part about the Target cards is that Target sells pretty much everything. Their shelves hold blenders, mops, bikes, floral-print dresses and baby monitors. With another department store card, like Macy’s, you have to question what percentage of your budget actually goes towards clothing. However, it’s easy to shift many of your purchases over to Target (which is, of course, exactly why they offer the card).
There’s no sign-up required, and no points to redeem. The discount is applied at the time of the purchase, so you don’t even have to wait until month end for a statement credit.
The debit card is unquestionably a winner
The Target debit card is only useable in-store, and can’t be used for online purchases, but a debit card has no impact on your credit score, and can’t be used to over-extend your spending. It’s like a gift card that earns a huge discount.
Since you don’t need a credit check, and you can only spend what you’ve already deposited on the card, there’s not much of a downside. You can take advantage of the discount, and while not being able to shop online will limit you a bit, it may be far better for many users than burdening themselves with the possibility of credit card debt. There are no fees associated with it, and you can earn rewards in-store and through the pharmacy rewards program.
So the Target credit card may be unnecessary
The Target credit card isn’t on a payment network (that’s Visa, MasterCard, AmEx and Discover) and so isn’t accepted outside of Target stores. In other words, its sole intention is to get you to overspend in their stores. Those who just want discounts at Target should probably stick with debit to avoid running into financial problems, since the credit card offers few additional advantages.
As a matter of principle, you should probably steer clear of in-store credit cards in general, since they’ll ding your credit score:
- The card’s low credit limit will raise your credit utilization ratio if you run a balance
- Opening the account will reduce the average lifetime of your credit card accounts
- It will also add to the “recent credit inquiries” in your file, lowering next year’s score
This isn’t a big problem if you have excellent credit and can take a bit of a hit. However, if you’re on the edge, the Target card may push you over and come back to haunt you in the form of higher interest rates and less access to other credit lines, like auto loans and mortgages.
And if you do have excellent credit, you may do better by sticking with a single standard rewards credit card that can be accepted at most other retailers. A fairly unknown perk of certain rewards cards is that they often offer discounts for online purchases, which might even beat Target’s deal.
Little-known secret: Earn 5% or more without the branded card
If you really want to earn a discount on online Target purchases, and you have great credit, you can get a good deal from some online rewards malls. For example, the Chase Ultimate Rewards Mall, where you can spend Chase rewards points, gives 3% back on Target spending when you buy through the mall. This is added to any rewards that your Chase card already pays.
Discover has an even better deal – 5% back. So if you’re a big shopper, you can get the Discover Escape instead, which nets 2% back on all purchases and has a 25,000 Discover Mile signing bonus. And when you want to buy from Target online, you can earn an additional 5% by shopping through ShopDiscover.com.