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Do’s and Don’ts When it Comes to Department Store Credit Cards

All department credit cards have one goal – to get you to shop at the department store more often. This is why department store credit cards give you the biggest discounts when you shop at the store.

Stores Motivate Customers to Buy More

For example, Target’s credit card is called, REDCard. Consumers that use the card at Target get 5 percent off most purchases. The card is available as a credit card or debit card.

Amazon.com has a Rewards Visa credit card. Holders of Amazon’s card get 3 percent cash back for purchases they make on Amazon, 2 percent cash back for restaurant and gas purchases, and 1 percent elsewhere. Amazon also allows its Prime members to receive 2 percent back on their purchases, but only if they first add money in their Amazon Balance by using a debit card. The program is called, Amazon Prime Reload.

Various retailers offer different kinds of perks, such as exclusive sales, free shipping, returns with no receipt required, and zero-interest financing, for their department store card holders.

When you sign up for a department credit card, you may also get a bonus. Kohl’s credit card is called, Kohl’s Charge. The card does not offer cashback in the way that other cards do. Instead, once a month, cardholders receive coupons in the mail. Typically, they allow cardholders to take between 15 percent and 30 percent off their entire purchase at Kohl’s for a limited time. The company claims that it determines who gets what coupons randomly, but cardholders claim that they receive better coupons if they shop at Kohl’s more often.

Kohl’s also frequently runs promotions during which customers get a $10 coupon per $50 they spend at the store. The coupons are handed out during the time of purchase, but they only become active several days later, which is a way for the store to have customers come back again.

Which Cards are Best for You?

Many retailers offer not just one card, but an array of cards. This can be very confusing. Many of the cards are co-branded with credit card issuers, including Visa, MasterCard, and American Express. Such co-branding means that you can use your card at any place of business that accepts the cards from particular issuers.

Some stores, including Macy’s and Bloomingdale’s, issue both co-branded credit cards and store charge cards. With a charge card, you can only shop at the department store and nowhere else. Department store charge cards typically have repayment terms that are more generous compared to co-branded credit cards. For example, you can apply for a credit card from Walmart that is issues by MasterCard. So, you can use the card at Walmart, Sam’s Club, and anywhere else MasterCard is accepted.

There is yet another type of a department store credit card. You can use this kind of card only if you want to finance a large purchase. Typically, you can find such cards at home improvement stores and electronics retailers.

For example, Barclaycard Credit Card offers special promotional financing on Apple products if the total amount of your purchase is above a certain number. You have to make a purchase within 30 days of opening an account, and the term of your promotional period depends on the purchase amount. In September 2017, the term was 6 months for purchases less than $499, 12 months for purchases between $499 and $999, 18 months for $999-$1,499, and 24 months for purchases of $1,499 and above.

The typical catch of such cards is that even if you are late with just one payment over the promotional period or you don’t pay off the amount of purchase in full during the period, the bank charges you the full interest rate for the entire promotional period.

Save Money in the Short Term, But Damage Your Credit Score

At some retailers, you can save an additional 10-15 percent or even more on the purchases you make on the day that you open your new department store credit card. If you are making a large purchase, this can be a big incentive. But there may be a limit on the discount. This is something you need to pay attention to. Also, it is very possible that you are only able to use the discount once, and it does not apply to future purchases.

For example, when you apply for and are given a Walmart credit card, you get a $25 credit on your first bill toward anything you buy within one day of your application being accepted.

If you are buying items from different department stores, you may be tempted to open several new cards to get promotional pricing, financing, and discounts. This is especially likely to happen during the holiday shopping period. Shopping at Sears, Target…why not get each department credit card?

Avoid the buy now, pay later attitude. If you get several credit cards, you will be overwhelmed with bills. Also, opening several new cards at once may damage your credit score. Many stores open a card with a very low credit limit. If your purchase is close to the limit, the card may decrease your overall debt-to-available-credit ratio, which negatively impacts your credit score.

Read the terms and rules of the credit card agreement and make sure that you understand them. If you do, using a department store credit card can be a great way to make purchases and save money or get cash back. Does your favorite department store offer a credit card?