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Why Is It Easier to Get a Retail Credit Card Than a Regular One?

Credit Cards, Rewards Credit Cards
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Store purchase

Unless you’ve been living under a pile of shredded credit cards, you probably notice that any time you shop at a retail store like Macy’s or Sears, the sales clerk is trying to push the store’s credit card on you. Sometimes the pitch is as simple as, “Would you like to save an additional 10% today?” which is a crafty way to get you to say “yes,” so they can then pitch you the card. Depending on how badly the company wants to get you onto their credit rolls, they may press the issue by asking, “Are you sure?”

There’s a reason for this. The store isn’t just happy selling you their products. They want you to finance them, too, in the hope that you will carry that balance just as the credit card companies want you to carry balances. There’s profit in your paying interest on your purchases.

Behind that quick approval

You may also have noticed that approval of your credit application is a lot easier with a retail store than with a regular credit card. There are several reasons for this.

The primary reason is the retailer has incentives to get you approved. It gives them that much more leverage on your spending dollar. They want you on their credit rolls because it makes it that much easier to sell you stuff going forward.

In the case of Macy’s, for instance, I often receive discount notices that are only applicable if I use my Macy’s card. That cash savings will be a greater incentive for me to purchase something at Macy’s and use the Macy’s card as opposed to any other card that might even offer rewards. Even better, if Macy’s can get you approved while you are standing there, they may offer a credit line greater than the amount you are spending. That gives the sales clerk the chance to tell you that you can spend even more than you were planning to! Hooray!

>>More: NerdWallet’s Best Store Credit Cards

Lower credit limits, higher interest rates

The other reason approval is easier is that credit lines for retail cards often have lower limits than regular cards. I’ve never been approved for a regular credit card with a purchase limit under $5,000 because I have excellent credit. Even with that excellent credit, Macy’s only gave me a $2,000 limit.

Yet another reason for the easy approval? Retail stores charge a higher interest rate on average than regular cards – something closer to 20% APR vs. 15% APR for regular cards.

Still, store cards can help build credit

Store credit cards can also be a boon to those who have borderline credit or are just establishing credit. Because of the ease of obtaining the card, it helps fulfill one of the important elements that go into the creation of your credit score, which is based on the following: payment history (35%), amount owed (30%), length of credit history (15%), new credit (10%) and type of credit (10%). That store credit card will qualify both as “new credit” and “type of credit.”

Store purchase image via Shutterstock