Store Credit Cards vs. Traditional Credit: What’s the Difference?

Unlike regular credit cards, you may use store credit cards only at particular retailers. However, they tend to come with special offers and good brand-specific rewards.

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Last Updated: 7/16/2022
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Store cards are usually ones that you may use with specific retailers. Examples of such cards include the Target RedCard Credit Card and My Best Buy Credit Card. A regular credit card, on the other hand, is one that you may use with any merchant that accepts payments from the network your card is linked to, be it Visa, Mastercard or American Express.

A co-branded card can serve as a rather effective middle ground. These cards are issued by conventional credit card providers and have tie-ups with various brands. Like store cards, they offer better rewards when you shop with the brand in question, but you also have the freedom to use them elsewhere. The Costco Anywhere Visa Card by Citi qualifies as a good co-branded card, as does the Capital One Walmart Rewards Mastercard.

On This Page:
MoneyGeek’s Takeaways

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Store cards have more relaxed eligibility criteria compared to regular credit cards.

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Store cards tend to come with higher interest rates than conventional credit cards.

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Co-branded cards can give you the perks of store cards and the flexibility of regular cards.

Store Credit Cards vs. Traditional Cards

Store cards are usually closed-loop in nature, meaning you may use them only with specific retailers. Regular credit cards are open-loop and operate using widespread payment processing networks. You may use most such cards globally, not just to make payments but also to withdraw cash from ATMs.

Store Credit Cards

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Pros of Store Cards

  • Most store cards come with no annual fees.
  • May come with high retailer-specific reward rates.
  • Access to special offers and promotions.
  • Typically easier to qualify for one compared to most regular credit cards.
  • May come with free shipping for online purchases.
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Cons of Store Cards
  • Limited usability.
  • Most come with lower credit limits than regular credit cards.
  • Lower credit limits could mean higher utilization rates and hurt your credit score.
  • Similar to a regular credit card, irresponsible use could also hurt your credit score.
  • Most charge higher APRs than regular cards.
  • May need to redeem rewards through the retailer in question.
Regular Credit Cards

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Pros of Credit Cards

  • People with good credit scores may qualify for low APRs and high credit limits.
  • The options for earning and redeeming rewards aren’t limited to any particular brand.
  • Possibility to earn higher rewards through category-based spending.
  • Possibility of getting a spend-based welcome bonus.
  • Ability to use the card at different merchants.
  • Access to various card-specific benefits, such as purchase and travel protection.
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Cons of Credit Cards
  • Might not offer high reward rates at your favored retailer.
  • People with no, little or poor credit history have limited options from which to choose.
  • Although high credit limits are more common with credit cards than with store cards, being awarded one is not guaranteed.
  • If you are awarded a lower credit limit, you may experience higher credit utilization rates, which, in turn, can hurt your credit score.
  • Indiscriminate or irresponsible use has the potential to hurt your credit score.

What Are Co-Branded Credit Cards?

Co-branded cards tend to find their way into the store card vs. credit card comparison because they can give you the best of both worlds. A co-branded card is issued by a conventional credit card provider and is linked to a specific brand, be it a retailer, an airline or a group of hotels. Most such cards offer high reward rates when you spend through the brand in question, and you may enjoy additional brand-specific perks.

Some popular retailers offer both a store card and a co-branded card. For instance, while you may apply for a Bed Bath and Beyond credit card that is issued by Comenity Capital Bank, this chain of retail stores offers a store card too. This is also the case with Best Buy. It offers a store card and a Visa credit card issued by Citi.

Comparing Store, Regular and Co-Branded Cards

While there are similarities in how store, regular and co-branded cards work, paying attention to the differences can help you decide which card type is best for you.

  • Factors
    Store
    Regular/General
    Co-Branded
  • Approval

    May qualify with poor
    credit

    People with average
    credit may qualify for
    some cards

    Typically need good
    to excellent credit

  • Limit of Use

    At the retailer in
    question

    At any merchant that
    is linked to your
    card’s network

    At any merchant that
    is linked to your
    card’s network

  • Interest Rates

    Higher than regular
    credit cards

    Most competitive
    rates of the three

    Typically higher than
    non-co-branded
    cards

  • Introductory Offers

    Not easy to find

    Fairly easy to find

    Provided by most

  • Credit Limit

    Toward the lower end
    of the spectrum

    Depends on your
    card and other
    eligibility criteria

    Depends on your
    card and other
    eligibility criteria

  • Rewards

    Store-specific rewards

    Might or might not
    come with rewards

    High reward rates
    through the partner
    brand

  • Credit Score Impact

    • Slight dip in score
      when you apply
    • High credit utilization
      ratio can have a
      negative effect
    • Slight dip in score
      when you apply
    • High credit utilization
      ratio can have a
      negative effect
    • Slight dip in score
      when you apply
    • High credit utilization
      ratio can have a
      negative effect

Approval

Conventional credit card providers follow more stringent guidelines than retailers that provide store cards when it comes to the approval process. Several retailers encourage customers to apply for store cards during checkout by offering to link promotions to their purchases. The application process for most store cards is fairly straightforward, and you can usually expect a near-instantaneous decision.

Plus, you may qualify for a store card even if you have less-than-perfect or poor credit. The lowest credit score you need to qualify for a store card depends on the retailer you select but usually varies between FICO scores of 550 to 660. Going forward, using your card responsibly and making all your payments on time helps you build your credit score. Bear in mind that applying for a store credit card, much like a regular credit card, will typically cause your credit score to temporarily drop by a few points.

Limit of Use

When you get a store card, you may use it only at stores that are part of the retail chain in question. For example, you may use the Target RedCard Credit Card only at Target stores. You cannot use this card to get a cash advance or transfer a balance from another card.

If you get a regular or co-branded card, you have considerable freedom in where you may use it, especially if it’s linked to popular networks such as Visa and Mastercard. The Target RedCard Mastercard, for instance, lets you withdraw cash from ATMs, and you may use it globally without worrying about paying foreign transaction fees.

Interest Rates

It is common for even the best store credit cards to come with higher APRs than regular or co-branded credit cards. Compare the average credit card APR of 14.39% across MoneyGeek’s data set of over 2,200 credit cards with store cards that have APRs of well over 20%, and you’ll notice that there’s a considerable difference. As a result, while paying off your credit card balance in full each month is ideal, it becomes all the more important if you get a store card. If you don’t, you may end up paying a tidy sum as interest charges.

Introductory Offers

Store cards generally do not provide a monetary welcome bonus to new cardholders. Instead, many offer a large discount or similar benefit on your first purchase to encourage customers to buy more.

By comparison, many regular and co-branded cards have welcome offers, such as spend-based bonuses and 0% APR offers on purchases and balance transfers.

The Capital One SavorOne Cash Rewards Credit Card lets you earn an early spend bonus of $200 by spending $500 on purchases in the first three months. It also comes with an intro 0% APR offer on purchases and balance transfers for the first 15 months. Similarly, the Hilton Honors Card from American Express lets you earn a welcome bonus of 100,000 points by spending $1,000 on purchases in the first three months. Both cards have no annual fees.

Credit Limit

Store cards typically have lower credit limits than most conventional credit cards. Depending on the card you get, your initial limit could be between $300 and $500. Traditional and co-branded cards can come with noticeably higher credit limits that can even be upward of $10,000, although this depends on the card you have, your creditworthiness and your income.

Rewards/Benefits

Store cards let you earn rewards when you purchase through that specific retailer. For instance, the My Best Buy Credit Card offers 5% back on all Best Buy purchases. However, you cannot use your Best Buy store card with other merchants. My Best Buy Visa Card, on the other hand, lets you earn rewards on other purchases as well, and it comes with a few bonus categories. Regular and co-branded cards may also come with additional benefits such as complimentary insurance coverage, no foreign transaction fees, statement credits and airport lounge access.

>>More: Flexible Points vs. Miles: Which Credit Card Reward Is Better?

Credit Score

Store cards can affect your credit score in the same way as regular and co-branded cards, for better or worse. Since providers of store cards follow less stringent eligibility criteria, getting one is easier than a regular card if you have a thin credit file or a low credit score. If you have a short or poor credit history, you may use a store card as an effective tool to build or rebuild your credit.

Applying for a new store card usually involves a hard credit inquiry, which will cause your credit score to drop by a few points. As with regular credit cards, paying off your store card’s balances in full each month can help improve your credit score.

You also need to pay attention to your card’s credit utilization ratio, especially if it’s your only card, as this is an important factor in calculating your credit score. Your credit utilization ratio refers to how much money you use from your card’s limit and should ideally remain below 30%. So, if your card comes with a limit of $500, you should try to use no more than $150 at any given time.

>>More: What Does Your Credit Score Start At?
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Many online retailers pre-qualify customers and offer pre-approvals during the checkout process. This is a great way to get approved for a new card without the uncertainty of applying directly. — Lee Huffman, credit card expert at BaldThoughts.com

Best Regular, Co-Branded and Store Credit Cards

There is no single best credit card because all the top options are designed to meet specific requirements. For instance, while some are ideal for people who wish to capitalize on their overall spending, others are more suited for those who wish to earn rewards through their favorite brands.

Best Regular Credit Cards

The best regular credit cards are typically ones that come with welcome offers and higher-than-usual reward rates.

  • Card Name
    Best for
    Offer
    Interest
  • Travel rewards

    • Early spend bonus of
      75,000 bonus miles if
      you spend $4,000 on
      purchases in the first
      three months
    • Up to 10X miles per
      dollar

    17.24% to 24.24%
    variable APR

  • Rewards on gas and
    groceries

    • Welcome bonus of
      $400 back if you
      spend $3,000 on
      purchases in the first
      six months
    • 6% cash back on
      groceries at U.S.
      supermarkets (up to
      $6,000 per year)
    • 3% cash back on gas
      at U.S. gas stations

    Intro 0% APR on
    purchases for 12
    months, then 14.74%
    to 24.74% variable
    APR

  • Balance transfers

    • Intro APR offer on
      balance transfers and
      purchases for the first
      24 billing cycles

    0% on balance
    transfers and
    purchases for 24
    months, then 15.24%
    to 25.24% variable
    APR

  • Cash back

    • Spend-based
      welcome bonus
    • Up to 5% cash back
    • Intro APR offer on
      purchases for the first
      12 months

    0% on purchases for
    12 months, then
    13.99% to 19.99%
    variable APR

Best Co-Branded Credit Cards

The best co-branded cards are ones that offer high reward rates when you use your card to pay for purchases through the brand in question. They may also come with other brand-specific benefits.

  • Card Name
    Best for (Travel, Cash-Back, Rewards)
    Offer
    Interest
  • Rewards on gas,
    dining, travel and
    purchases at Costco

    • 4% cash back on gas
      purchases, including
      at Costco (for the first
      $7,000 per year)
    • 3% cash back on
      restaurants and travel
      purchases
    • 2% cash back on
      non-gas purchases
      from Costco and
      Costco.com

    15.99%
    variable APR

  • Rewards at Walmart,
    on travel and
    purchases at
    restaurants

    • 5% cash back at
      Walmart.com (pickup
      and delivery)
    • 5% cash back in
      Walmart stores for
      the first 12 months,
      2% thereafter
    • 2% cash back at
      restaurants and on
      travel

    17.99%, 23.24% or
    26.99% variable APR

  • For rewards on
    purchases at
    Amazon.com and
    Whole Foods, as well
    as at restaurants, gas
    stations and
    drugstores

    • $100 Amazon gift
      card upon approval
    • 5% back on
      Amazon.com and
      Whole Foods
      purchases (with an
      eligible Prime
      membership)
    • 2% back at gas
      stations, restaurants
      and drugstores

    14.99% to 22.99%
    variable APR

  • Verizon Visa Card

    Rewards on gas,
    groceries, dining and
    Verizon purchases

    • 4% on grocery and
      gas
    • 3% on dining
      (including takeout)
    • 2% on Verizon
      purchases

    21.99% or 25.99%
    variable APR

There are many different rewards cards to choose from, so it’s important to pay attention to both your individual preferences and parameters such as reward rates, welcome bonuses, annual fees and APRs. This holds true regardless of whether you are considering applying for a rewards card, a travel card or a cash back card.

Best Store Credit Cards

Bear in mind you’ll only be able to use a store card at the retailer in question. No matter how good your credit score is, chances are you’ll start off with a relatively low credit limit. Carrying balances from one billing cycle to the next is not a good idea because you’ll need to pay high interest charges unless the retailer offers a 0% APR interest promotion on your purchases. Additionally, you’ll need to redeem the rewards you earn through the same retailer. To help you determine if you might benefit from a store card, we have put together a list of some of the top cards that deserve your attention.

  • Store Card Name
    Product/Category
    Perks
    Card Limit
  • Bed Bath and
    Beyond Store Credit
    Card

    Merchandise retail
    store

    • $20 My Funds if you
      make a $20 purchase
      on the day your card
      is approved
    • 60 points per dollar
      spent at Bed Bath &
      Beyond and its family
      of brands
    • 6-, 12- or 24-month
      financing options

    Varies based on
    income and credit
    history

  • Target RedCard

    Big-box department
    store

    • 5% off at Target
      (in-store and online)
    • Free shipping on
      most products at
      Target.com
    • Access to special
      offers
    • Longer
      returns/exchange
      window

    Usually from $200 to
    upward of $2,500

  • Lowe’s Advantage
    Credit Card

    Merchandise retail
    store

    • 20% (up to $100) off
      when you open and
      use your new card
      (offer ends 1/31/23)
    • 5% off on all
      subsequent
      purchases
    • Six months special
      financing option
    • 85 months fixed
      payments option
    • Access to special
      offers

    Usually from $300 to
    over $5,000

  • My Best Buy Credit
    Card

    Consumer electronics
    retailer

    • 5% back on Best Buy
      purchases
    • 24-, 36- and
      48-month financing
      options

    No fixed limit

Other Questions You May Have About Store Credit Cards

Go through answers to other commonly asked questions about store credit cards to determine if getting one or more might work well for you.

Next Steps

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About the Author


Rajiv Baniwal has been writing about different financial topics for over 15 years. Meticulous in his research, he makes sure he provides accurate and up-to-date information. His areas of expertise include mortgages, personal loans, credit cards, insurance and international money transfers.


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*Rates, fees or bonuses may vary or include specific stipulations. The content on this page is accurate as of the posting/last updated date; however, some of the offers mentioned may have expired. We recommend visiting the card issuer’s website for the most up-to-date information available.
Editorial Disclosure: Opinions, reviews, analyses and recommendations are the author’s alone and have not been reviewed, endorsed or approved by any bank, credit card issuer, hotel, airline, or other entity.
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