Store Credit Cards: Are They Worth Getting for the Holidays? (Part 2)

Headed to your favorite retail store for some shopping this year?

Here’s a word of advice: prepare yourself for an onslaught of credit card offers. Cashiers will entice you with on-the-spot savings if you sing up for a store card and, we’ll admit, it’s hard to say no consider credit bureau Experian estimates each of us will spend nearly $1,000 this season on holiday expenses.

The goal of each retailer you visit is to get you to make an impulse decision, a.k.a. deciding without thinking. So, if you haven’t rounded up the majority of your holiday gifts, take a moment to read through this second part of our series on store credit cards.

The purpose of this series is to help you know beforehand what you’re getting yourself into if you sign up for one of the cards we’ve listed. To that end, each time we review a card we’ll include the up-front perks you get with it, the card’s APR and any fees you pay when you make a late payment.

At the end of this article, we’ll give you our thoughts on store credit cards in general and tell you why it may be better to use the credit card you already have instead of signing up for one at your favorite retail store.

In our first article, we covered the cards from Target, Walmart, Best Buy, Bed Bath & Beyond and Gap. In this article, we’re reviewing cards from Macy’s, Home Depot, Lowe’s, Sears and Kohl’s.

6. Macy’s Credit Card

Macy’s offers its customers two cards: the Macy’s credit card and the Macy’s American Express. You can sign up for the Macy’s card online, but Macy’s AmEx applications have to be completed in store.

Perks of the Macy’s Credit Card

Once you’re accepted for your Macy’s card, you’ll get two main perks:

  • 20% savings on purchases made the day you’re accepted and the following day.
  • Enrollment as a Preferred member in the Macy’s loyalty program, which entitles you to three “Star Pass” discounts and surprise savings offers when you checkout online or in the store.

If you choose the Macy’s American Express card, you get the perks we just listed plus:

  • Two Plenti points for every dollar you spend on beauty and fragrance products at Macy’s, and on gas and groceries.
  • One Plenti point per dollar on everything else.

The Plenti program is basically a rewards network where you can earn points on purchases at AT&T, Exxon, Rite-Aid, Hulu, Chili’s, Exxon, Macy’s and more. Macy’s cardholders get $10 off a purchase when they hit 1,000 Plenti points, a rate that is comparable to other store-based points systems.

Just like the other cards we’ve talked about, the Macy’s card has exceptions. The 20% discount applies to most everything you buy except gift cards, gourmet food, wine, restaurants, services, and certain departments in the store.

Also, your cash savings on the 20% discount are capped at $100. In other words, you get a 20% discount on the first eligible $500 you spend.

APR, Penalties & Fees for the Macy’s Credit Card

The Macy’s card has a 25.49% APR and late fees of up to $37, which is similar to what you get with the Bed Bath & Beyond credit card.

This is a seriously high APR when compared to regular credit cards like the Chase Freedom Unlimited or the Capital One Venture card. Both of those cards offer low-end APR’s of under 15%.

Pro tip: Pay your balance in full and you won’t be charged any interest.

7. Home Depot Credit Card

Home Depot offers a consumer credit card with straightforward perks and APRs.

Perks of the Home Depot Credit Card

The perks on this card are all about financing. At the time of our research, their financing perks were:

  • 12 months of interest-free payments on purchases of $299–998
  • 18 months of interest-free payments on purchases of $999–1998
  • 24 months of interest-free payments on purchases of $1999 and above

These offers change from week to week, so make sure you check their credit cards page before you sign up for the card.

Home Depot also offers its cardholders occasional financing offers on specific departments. For example, at the time of our research, there were financing deals for building materials, heating, and air conditioning, and water treatment equipment.

APR, Fees & Penalties for the Home Depot Credit Card

The card has an APR range of 17.99% to 24.99%, which means your percentage will fall somewhere in that range according to your credit history and credit scores. If you don’t have any late payments in the past couple of years and your credit scores are good (above 750), there’s a chance you’ll get a sub-20% APR.

We had to call Home Depot’s credit card phone number to find out their late fees, and what we found was pretty interesting. You’ll pay $25 for your first late payment, and if you pay late again during the next six months, it will cost you $35. If you make it six months without another late payment, you get a clean slate and the $25/$35 cycle starts over.

This structure is different than other cards we’ve reviewed in this series because they usually charge you one fee for the first late payment, then bump up that fee for any subsequent late payments.

8. Lowe’s Credit Card

The Lowe’s credit card offers consumers a wider range of perks choices compared to its competitor, Home Depot.

Perks of the Lowe’s Credit Card

New cardholders get to choose from one of four perks options:

  • 5% off every purchase as long as your account is open
  • 10% off your first purchase
  • 12 months of interest-free financing on a purchase of $299 or more
  • Long-term, low-interest financing for purchases of $2,000 or more: 36 months at 3.99%, 60 months at 5.99%, 84 months at 7.99%

Remember, you only get to choose one of those offers, so make sure you know what you want before you make your purchase.

APR, Fees & Penalties for the Lowe’s Credit Card

The APR on this card is 26.99%, which is the highest of all 10 credit cards we’ve reviewed in this series. Late fees range anywhere from $25 to $37 depending on your balance.

9. The Sears Credit Card

Sears offers its customers two types of cards, the Sears card and the Sears Mastercard. The cards have slightly different perks, but the same APR and late fees. The Sears card can be used at Kmart, too.

Perks of the Sears Card

  • $10 off your first purchase
  • Various financing offers for certain departments (click here for the current offers)
  • Occasional offers for discounts available only to cardmembers
  • Enrollment in the Shop Your Way points rewards program (1000 points = $1)

If you have the Sears Mastercard, you get $50 off your first purchase of $500 or more. Aside from that, the rest of the perks are the same.

As for the Shop Your Way program, you’ll find it’s similar to other rewards programs we’ve covered in this series. Your points are turned into dollars that you can use to buy Sears and Kmart products through the Shop Your Way website.

APR, Fees & Penalties for the Sears Credit Card

Your APR will be 25.49% for all purchases and late fees will be up to $37, depending on your balance.

10. Kohl’s Credit Card

The Kohl’s credit card is the last one on our list, and it has what we think is the most robust perks plan.

Perks of the Kohl’s Credit Card

Kohl’s cardholders get a serious lineup of shopping discounts throughout the year:

  • 25% off your first purchase the day you are approved for your Kohl’s card
  • 15% off when your card arrives in the mail
  • 12 special offers sent to you throughout the year
  • Upgrade to 18 special offers a year if you spend $600 over the course of the year

If you spend a lot of time shopping at Kohl’s we can see how these discounts could really rack up some savings.

APR, Fees & Penalties for the Kohl’s Credit Card

APR is 24.24% and the late fees can be between $15 to $37, a Kohl’s customer service representative told us:

  • If your balance is less than $15, your late fee is $15
  • If your balance is higher than $15, your late fee is $27
  • If you make two late payments in a row, the second month’s late fee is $37

The Big Question: Is It Worth It to Get a Store Credit Card? 

You can answer this question a hundred different ways, but what’s important to us is how much a card will cost you over time.

For example, a store credit card could have great up front offers like the Walmart credit card but will be an expensive card over the long run because of a high APR. You won’t have to fork over interest payments if you pay your balance in full every month, but statistics indicate you probably won’t.

We All Have Debt

According to our friends at Credit Card Forum, in 2014, 41% of Americans carried a balance on their card. The other 59% were split between people who weren’t using their card and people who pay their balance off every month.

And, when you add in the fact that people who don’t pay off their card each month have an average balance of more than $16,000, you can see why your debt is a hot commodity for credit card companies and retail stores.

One thing we noticed, though, is that normal credit cards have much lower APRs than store credit cards.

Credit Card Companies Want Our Business

Credit card companies like Chase, Citi, and Discover are in intense competition with each other to get your debt, so their APR’s are pretty low. In fact, the average APR on a credit card balance in 2015 was 13.49%. The retail world isn’t like that, though.

Stores Want Our Business Too, and They Want It Quick

Stores don’t have to compete with other stores when they ask you to sign up because you’re already in their store or website ready to make a purchase. And since most of them can approve you right at the register, they can turn around and put the squeeze on you with time-sensitive offers:

  • Macy’s: 20% savings on purchases made the day or day after you get your card.
  • Walmart: 15% cash back and a $75 gift card if you make certain purchases the day you get your card.
  • Lowe’s: Less than a week to make purchases under the promotional interest-free offers.

Now, take a second to think about this scenario. The cashier (in-store) or pop-up window (online) tells you it will take less than 60 seconds to approve you for your card, which means you can get the perks or discounts while you’re standing there.

The offer dazzles you, and you don’t see why you shouldn’t say no. After all, you’ve been shopping for a few hours, the line behind you is full of impatient shoppers and you don’t have much fight left in you to think through why you shouldn’t get a $75 gift card for the TV you’re buying for your spouse.

So, you say yes.

Store Credit Cards Have Clear Drawbacks

Most of the time, that “yes” isn’t thought through. To help you make a better decision next time you’re presented with a store card offer, we want to tell you about a few things we noticed during our research.

Poor transparency: It’s much harder to find a store credit card’s APR or late fees online. In several cases, we had to call the store’s credit-line number in order to get specifics.

High APRs: More than half of the store cards we checked out had APRs higher than 24%.

Poor perks: Most of the cards we researched had poor perks programs that made you choose between up-front rewards or long-term rewards.

Points/cash back perks limited to store: Several cards had cash-back bonuses or discounts, but those cash perks had to be used in the store and nowhere else.

In our opinion, these four factors make us think twice about signing up for a store credit card. Regular credit cards offer lower APRs and far better perks. We talked with Daniel Tulbovich, co-founder of credit-card rewards research site RewardExpert to get a better sense of why a regular credit card might be a better choice.

Why a Regular Credit Card is Better Than a Store Credit Card

Daniel and his colleagues at RewardExpert gathered data about the various shopping portals you get with credit card companies (Citi Bonus Cash, Discover Deals, Chase Ultimate Rewards), and found that many of the discounts or rewards points/cash you get with regular cards are better than a store credit card.

Discover Deals vs. Gap Card: Discover Wins

For example, Discover cardholders shopping at major retailers through the Discover Deals portal can save 20% on purchases at Claire’s, 10% at Gap, 40% at Men’s Warehouse, and 20% off appliances at Best Buy.

Let’s take a second to compare the rewards you get at Gap. Owners of the Gap Card will get a $10 cash bonus for every 1,000 points ($200 spent in Gap stores) and that bonus cash has to be used at Gap stores.

On the other hand, Discover cardmembers’ 10% discount means they get $20 off if they spend $200 at Gap, doubling the rewards you’d get with the actual Gap card.

Rotating Rewards Mean Extra Savings During the Holidays

Also keep in mind that some cards have rotating categories, which means for three months you can get 5% cash back at restaurants and movie theaters, and then the following three months you can get 5% cash back at wholesale clubs and certain websites.

Here’s a list of the holiday bonus categories for several major popular credit cards RewardsExpert researched:

Think in Advance About Taking Advantage of Shopping Portals

To get the most savings, Daniel said, consumers just need to plan ahead.

“Sit down and figure out what you’re trying to buy, and then check to see if what you’re trying to buy is available through your card portal,” Daniel recommended. “Most of the people will find something of interest to them in one place or another. You can get great cash back or miles; either way you can get a great deal for yourself.”

When we asked Daniel if any of the rewards-card data he found was surprising, he said the research was more of a confirmation than anything else.

“I can’t say any of the data we gathered surprised us,” Daniel said. “But it did confirm for us, numbers-wise, that, in many cases, you are better off using a regular credit card.”

In addition to straight-up cash rewards and discounts, regular credit cards are better because they offer purchase protection ($0 liability if someone uses your card without permission), extended warranties and, in the case of the Citi’s Price Rewind program, an automated purchase tracker that reimburses you if something you bought with your card goes on sale for a lower prices.

Other Experts Agree: Rewards Credit Cards Are Better Than Store Cards

RewardExpert’s research was really convincing, but we wanted to reach out to other personal finance experts to see if they agreed. Long story short: They did.

In our conversation with Napkin Finance founder Tina Hay, we heard much of the same perspective we gathered from Daniel Tulbovich.

“For the stores, their card offers a lot of incentives to spend more money, which is the downside for the consumer,” Tina said. “The other downside is a lot of store cards have high interest rates, so, even with all the incentives, you’re spending more in the long-term.”

NextAdvisor’s Julia Myhers-Nunes pointed out that several of the rotating—category cash back cards have tremendous deals for new cardmembers, making them more advantageous for the consumer than store cards.

She pointed to the Chase Freedom card as an excellent example of how a regular credit card can bring you a nice chunk of rewards change come the holiday season.

“Chase Freedom has rotating categories and you get 5% cash back on select categories,” she said. “Plus, you get a $150 bonus if you hit $500 spending in the first three months.”

Our Conclusions: Very Few Store Cards Are Worth It

Our research into the world of store credit cards has been really interesting for us. Our initial thought was that most of these cards aren’t worth getting because they have such high APRs.

As we found out, that wasn’t true for the Target, Best Buy and Lowe’s store credit cards because their 5% cash rewards counteracted their high APR. But remember this – if you have a solid credit history (750+), it might be a good idea to go for a regular card that gives you a low APR around 14% or 15%.

Lower APRs Are Out There

According to FICO’s 2015 stats, 38% of consumers have FICO scores of 750 or higher, which means their great credit can snag them APRs in the neighborhood of 10%–15%. As we’ve mentioned earlier, the average APR on a regular credit card is 13.49%, which is a far cry from the 25% cards we encountered in these articles.

It would be a wise choice to apply for a regular credit card if your FICO score is at 750 or above, as you can take advantage of low APRs that will make every purchase a bargain compared to store credit cards.

Credit Card Shopping Portals Are a Gold Mine

If you’re hesitant about saying goodbye to your favorite credit card, we get it. Brand loyalty is a hard thing to break, but we think the discounts you can score in Citi, Discover and Chase’s online shopping portals can ease the pain.

As RewardExpert’s Daniel Tulbovich pointed out, there are dozens of opportunities for savings through these portals. The best way to take advantage of those savings is to plan your gift list ahead of time – once you know what you want, you can figure out which portals have the gifts you’re looking for.

Above All, Be Smart

The golden rule of credit card usage is pay off your balances in full, on-time every month. Using this method means:

  • Your credit score will thrive because you won’t have late payments or high balances
  • You won’t be paying interest on your purchases 
  • Rewards won’t be canceled out by late fees or interest payments

Credit cards can be a confusing topic because there are so many little details and nuances. If you want to learn more, we’ve got a great collection of credit-card articles that will help you build your consumer knowledge.

We suggest starting with a two-part series we did on credit card fine print and the four main types of credit cards. You’ll learn what to look for when reading through a card’s terms and conditions, get an explanation of some of the fine-print vocabulary you’ll come across as well as receive an overview of what travel, cash-back, low-APR and luxury credit cards have to offer.


J.R. Duren

J.R. Duren is a personal finance reporter who examines credit cards, credit scores and bank products. J.R. is a three-time winner at the Florida Press Club’s Excellence in Journalism contest and his advice has been featured in MSN and Fox’s money sections.


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