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Before You Get a Retail Credit Card, Consider Your Options

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Get One of These Cards Instead of a Retail Card

Admit it: You sometimes feel tempted to sign up for a store credit card. You’re standing at the register (or staring at a full online shopping cart) and it sounds like a slam dunk to get a big discount right now.

But store credit cards are rarely a good deal. The credit limits are lower than most other cards, so it’s too easy to use a big percentage of your available credit during a routine shopping trip, which can bring your credit score down. Plus, the benefits are almost always confined to one store — and they aren’t usually as good as the ones you can get from a more general credit card.

But eschewing retail credit cards doesn’t mean missing out. If you like to earn rewards when you shop, consider getting one of these cards instead.

Best for online shoppers: Discover it® - Cashback Match™

Store credit cards often hook you by offering financing deals for large purchases like appliances, electronics or home improvement supplies. But looking beyond the big box might yield you a better bargain in the long run.

For financing large purchases, the Discover it® - Cashback Match™ beats nearly every store card out there. With interest rates at 0% on Purchases and Balance Transfers for 14 months, and then the ongoing APR of 11.99% - 23.99% Variable APR, you have a chance to pay off your purchase before the rate goes up. So you might want to put that new ride-on mower on the Discover it® - Cashback Match™ instead of on a branded store card.

In terms of rewards, the Discover it® - Cashback Match™ offers 5% cash back in rotating quarterly bonus categories (up to $1,500 spent per quarter). You’ll also get 1% cash back on all your other purchases. It’s also an economical choice, because it charges an annual fee of $0 and comes with no foreign transaction fees.

The best part? The Discover Deals program gives you extra cash back — sometimes as much as 20% — at 200 affiliated retailers, both in store and online. The smartphone app lets you browse for deals, coupons and extra cash back offers while you shop. The program also analyzes your shopping habits and alerts you when there’s a new deal that’s likely to appeal to you.

We challenge you to find a store card that offers that much.

Perfect for fashionistas: Blue Cash Preferred® Card from American Express

Yes, it is possible to find a store card that gives you discounts worth more than 3%, but in most cases you can use it only at that store. For a general credit card that gives 3% rewards on select U.S. department store purchases, the Nerds like the Blue Cash Preferred® Card from American Express. In addition, you get 3% back on U.S. gas purchases, too, which will come in handy once gas prices start to creep back up. You also get 6% back at U.S. supermarkets (up to a $6,000 annual cap — then 1%) and 1% back on all other purchases.

While it has an annual fee, it currently has an annual fee of $95. Because the rewards are so juicy, the fee just might be worth it if gas and groceries are a big slice of your budget, or if you do most of your clothes shopping at qualifying select U.S. department stores. Plus, there’s a nice sign-up bonus: $200 statement credit after you spend $1,000 in purchases on your new Card within the first 3 months. Terms Apply. And the rewards come in the form of cash back — no muss, no fuss.

Best for 5% cash back: Chase Freedom®

If you have your heart set on 5% cash back, look no further than the Chase Freedom®. You get a steady 1% cash back on all purchases, and you also earn 5% back on bonus categories that change every quarter (up to $1,500 spent per quarter). Historically, retailers in the 5% category have included department stores, restaurants and Amazon.com. Consequently, you’re likely to earn big rewards no matter where you shop.

Unlike many other cash-back cards, the Chase Freedom® comes with a signup bonus: Earn a $150 Bonus after you spend $500 on purchases in your first 3 months from account opening. Because its annual fee is $0, we consider it a great deal. Check out our complete review for more information.

The bottom line: The next time you’re tempted to open a store credit card, remember: for benefits like cash back and 0% financing on purchases, you can almost certainly do better with a general credit card from a reputable issuer.

Virginia C. McGuire is a staff writer covering personal finance for NerdWallet. Follow her on Twitter @vcmcguire and on Google+.


Updated Aug. 11, 2017

Image via iStock.