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Sears Credit Card: Is It Right for You?

March 3, 2017
Credit Cards, Rewards Credit Cards
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Normally, our advice for people considering a store credit card is pretty consistent: If you shop at the same store frequently — once a month or more — the discounts and rewards can make it worth your while to get that store’s dedicated credit card. Otherwise, we recommend a general-purpose rewards card that pays a good rate on the purchases you make.

But we’re going to deviate from our standard advice and say that even frequent Sears shoppers might want to skip the retail chain’s branded credit cards. Sears stores accept Visa, MasterCard, American Express and Discover, so you’ve still got plenty of options.

What Sears credit cards are available?

Die-hard Sears fans have two choices:

  • Sears Card: This is a store credit card that you can use at Sears and Kmart, both in-store and online, but not at other merchants. All purchases earn 10 points per dollar, and points can be redeemed at checkout at a rate of $1 per 1,000 points. That’s essentially a 1% rewards rate. Discounts and promotions, which usually pay more points than the standard rate, are offered through the Shop Your Way rewards program. This card also offers no-interest promotions on certain large purchases.
  • Sears MasterCard: You can use this card at any merchant that accepts MasterCard. For the first year the account is open, you’ll earn “5% back in points” on gas station purchases and “3% back in points” on eligible restaurant and grocery store purchases. After the first $10,000 in combined gas, restaurant and grocery spending, you’ll drop back to a rewards rate of “1% back in points.” You’ll also earn an unlimited “2% back in points” at Sears and Kmart during the first year. After the first year, everything drops back to 1% in points.

Neither card has an annual fee.

Should you get a Sears credit card?

Both Sears credit card options suffer from the same afflictions as most store cards: high interest rates and restrictive rewards. Let’s start with interest. As of March 2017, both cards were charging annual percentage rates of 25.74%. That’s quite high.

Worse, the Sears Card’s “no interest” offers on select large purchases can end up costing you hundreds in interest. That’s because the interest in these promotions is not waived, as with 0% APR offers on bank cards. Instead, it’s deferred.

When interest is waived for, say, 12 months, the card issuer doesn’t charge you any interest. After the 12-month period ends, the issuer can charge you interest going forward. But when interest is deferred for 12 months, interest is accruing in the background. As long as you have the purchase fully paid off by the end of the 12 months, you’ll pay no interest. But if any of the balance is left over — even 50 cents — you’ll pay interest on the entire purchase going all the way back to the day you made it. Read more about the dangers of deferred interest.

Now for the rewards. We got excited for a second when we saw that you can get “5% back in points” on gas purchases and “3% back in points” at restaurants and grocery stores. On the surface, those rewards appear comparable to what’s offered by the most competitive store cards. But those rates expire after the first year, and then you’re back to 1% in points.

And where can you redeem your rewards? Through the Shop Your Way program, of course. That means you’re restricted to redeeming them for coupons on Sears products.

Alternatives to a Sears credit card

There are a lot of good options that will likely prove more rewarding than a Sears credit card.

» MORE: NerdWallet’s best rewards credit cards

 HOW ABOUT THAT COSTCO CARD?

We mentioned the Costco Anywhere Visa® Card by Citi above, but it’s worth looking at the details because this is a good example of what a really competitive store-branded credit card looks like. Yes, you must redeem your rewards at Costco, but you can redeem them for cash at customer service if you like. And they’re pretty great rewards at that. You earn:

  • 4% back on eligible gas purchases, on up to $7,000 per year in spending
  • 3% back on eligible restaurant and travel spending
  • 2% back at Costco and Costco.com
  • 1% back on all other purchases

The card has an annual fee of $0 but requires a Costco membership, which is at least $55 a year (rising to $60 in June 2017).

FOR 5% BONUS CATEGORIES

The Discover it® Cash Back gives you 5% cash back in rotating categories that you activate, up to $1,500 in spending per quarter, and 1% on all other purchases. (See current categories here.) Historically, department stores — including Sears — have been among the bonus categories. The annual fee is $0, and there’s a compelling bonus for new cardholders: Discover will match ALL the cash back you've earned at the end of your first year, automatically. There's no signing up. And no limit to how much is matched.

FOR FLAT-RATE CASH BACK

If you don’t want to deal with a card that pays different rewards for different types of purchases at different times of year, a good flat-rate rewards card is your best bet. The Citi® Double Cash Card – 18 month BT offer is an excellent example. It gives you 1% cash back on every purchase you make, plus another 1% back when you pay for what you’ve bought. If you pay your balance in full every month, you’ll get your full rewards fairly quickly.

» MORE: NerdWallet’s best store credit cards

Information related to the Sears Card and the Sears MasterCard has been collected by NerdWallet and has not been reviewed or provided by the issuer of these cards.

Virginia C. McGuire is a staff writer at NerdWallet, a personal finance website. Email: virginia@nerdwallet.com. Twitter: @vcmcguire.