When it comes to using a store credit card to build credit, my favorite story is one my parents told me about how they built credit before I was even born.
They went to Sears (remember them?), and applied for a store credit card to purchase a typewriter. That’s right, a typewriter.
After paying the bill off several months later, their credit had improved to the point where they could qualify for other credit cards. The store card provided them the opportunity to upgrade to better credit products over time.
Today, Sears stores are about as rare as typewriters, but the method of using a store charge card to build credit still works.
The best part? Even if you’ve had serious credit problems, it can still be easy to be approved for a store credit card. And when you make your payments on-time, a store credit card can be a great tool for building or rebuilding your credit.
Let's break down what you need to know about store credit cards, how you can use them to build your credit, and a few store card options.
Have you ever heard the expression, “Just put it on my tab?”
For centuries, merchants helped their customers pay for everyday purchases using credit. Customers get to buy what they want now and pay for it later.
A retail store credit card is just a modern way to do the same thing.
When you open a retail credit card account, you make purchases from the store that you pay back later. Unlike unsecured credit cards, store cards only work in a single store, or chain of stores.
Typically, you can avoid interest by paying your balance in full before the due date. Or, you can choose to extend payment and incur interest charges on your balance.
While gaining access to store credit is a great benefit, store cards offer more than just a means of financing.
For example, many store cards offer rewards for your spending. In most cases, the rewards are received in the form of store credit that can be used to make new purchases.
Many retailers recognize store card holders as some of their best customers, and send them exclusive discounts and promotional offers.
While most retail cards can only be used for in-store and online purchases from the store, some are also part of a payment network such as Visa or Mastercard.
If your store card is part of a payment network, you can use it at any retailer that accepts those cards.
In the end, it could be worth getting a store card to rebuild your credit, to enjoy its rewards and benefits or both.
When you've had serious credit problems, it can seem like there aren’t many good options to help you rebuild it.
You can apply for a credit card for those with poor credit, but these will invariably have very high interest rates and fees.
Another option is to open a secured credit card account, but that requires the payment of a refundable security deposit before your account can be opened, and possibly an annual fee as well.
If you find yourself in this situation, it may be time to learn how to build your credit back so you can establish and maintain good credit for the future. If you choose not to go with a credit builder loan or other option to reverse your bad credit, you can also try a store credit card.
With a store credit card, you won't have to pay an annual fee.
While most store credit cards can only be used for purchases from a single retailer, they have the same impact on your credit history and credit report as any other kind of credit card.
Store credit cards report your balance and payment information to the major consumer credit bureaus, just like any other credit card.
That means as long as you make your payments on time, your store credit card will add to your credit report’s positive credit history, which can help improve your credit score. (Learn how to read your credit report.)
If you already have a secured or unsecured credit card, it can still help to apply for a store credit card.
However, the more cards you get, the less each additional card will make a difference.
You can also close a store credit card at any time, and it won’t have a major effect on your credit. Just keep in mind if you close it, it won’t continue to add to your credit history either.
While it can be easier to be approved for a store credit card than most other types of cards, it’s by no means guaranteed.
In general, you can be approved for a store credit card with a limited credit history, or with fair or average credit.
This usually means a credit score in the low 600s or better. Below that is considered to be bad credit.
If your credit is considered to be bad or poor, it’s unlikely you’ll be approved for most store credit cards, but there are some exceptions.
For example, the Walmart store card, which can only be used at Walmart stores and Walmart.com, will reportedly approve applicants with credit scores as low as 550, but the Walmart Mastercard requires a credit score in the mid-600s.
The Target RedCard and the Best Buy credit card require fair or average credit, which is also a score in the mid-600s.
Another feature of a store card is that most applicants receive an immediate decision when they apply in the store or online.
For example, you can apply for the Walmart Credit Card at any store register or jewelry kiosk, and most applicants receive an instant decision.
Store credit cards can be a valuable way to help you rebuild your credit, but they often come with higher standard interest rates than most credit cards, even secured cards.
But unlike a secured credit card, you’ll never be asked to make a deposit to open a retail credit card account.
And although some secured cards have annual fees, it’s extremely rare to find a store credit card that has an annual fee.
As we’ve seen, store credit cards have higher-than-average interest rates, but the difference is not so great when you have fair or average credit.
Without good or excellent credit, any regular credit card you’re approved for will have a much higher-than-average standard interest rate.
Also, regular credit cards for people with fair or average credit will usually have a significant annual fee while offering little, if any rewards.
The best store cards will offer perks and benefits beyond just a line of credit.
For example, you should expect to receive rewards for your spending, as well as access to coupons and special promotions.
Here are some of the top store credit cards:
The Target REDcard is one of the most valuable store credit cards because it’s offered by a large retailer that offers a wide variety of products, often including groceries.
When you use this card, you save 5% on qualifying purchases. You also receive access to special products and promotions, such as a 10% off coupon on your account anniversary.
Other benefits include free shipping on most items from Target.com and an extra 30 days for returns.
The standard interest rate for everyday purchases is 25.15% APR, which is high, but competitive for store credit cards like this.
This card offers a 25-day grace period to pay your entire statement balance to avoid interest charges, and there’s no annual fee.
The Walmart credit card is also a favorite because of the size of Walmart, the largest retailer in the U.S.
It’s also a very easy card to get as they approve applicants with poor credit.
This card offers 3% back for purchases at Walmart.com and 1% rewards for in-store purchases. Rewards are received in the form of store credit.
This card also offers you a $25 credit when you spend $25 on purchases on the day you’re approved for this card. It has a standard APR of 25.74% and no annual fee.
The My Best Buy card is offered by one of the only remaining national electronics retailers and offers 5% back in rewards, or 6% back for Elite Plus Cardmembers.
Become a My Best Buy program Elite Plus member by spending $3,500 at Best Buy or BestBuy.com or by spending $3,500 on your My Best Buy Visa during a calendar year.
Instead of rewards, you can also choose a flexible financing option on purchases of $199 and up.
New accounts receive 10% back in rewards, or flexible financing, on the day they’re approved.
The standard interest rate is 27.49% APR, with a 25-day grace period on purchases, and there’s no annual fee.
Do you have an eligible Prime account on Amazon? If so, you may want to look into Prime rewards for building your credit. This online retail giant offers the Amazon store card to their Prime members.
It features on 5% back on purchases from Amazon.com. The standard interest rate for this card is 28.24%, but there are special financing options available.
Additionally, there’s the Amazon Store Card Credit Builder, which is a rare secured card offered by a retailer.
It requires a minimum of a $100 security deposit, and the amount of the deposit becomes your credit limit. Many members find that these Prime rewards are worthy of opening an account.
There’s no annual fee for either version of this card.
The Kohl's charge card offers a 30% savings on purchases made on the day of approval, plus additional benefits.
For example, you’ll receive exclusive savings opportunities throughout the year, and a special gift on your account anniversary when using this department store credit card.
You will also earn one reward point for each dollar spent, and get a $5 reward or every 100 points earned.
If you spend $600 on your card in a calendar year, you become a Most Valued Customer and receive access to free shipping events every month.
This department store credit card has a standard interest rate of 27.24% APR, a 25-day grace period and no annual fee.
A store credit card is one of several options for rebuilding credit, and can be one of the easiest to use. At the same time, a store credit card can also offer valuable rewards and benefits.
By understanding the advantages and drawbacks of a store credit card, you can decide if it’s right for your needs.
Forbes. "Best Credit Cards for Rebuilding Your Credit Score Of September 2021". https://www.forbes.com/advisor/credit-cards/best/rebuilding-credit/
Credit Card Insider. "Best Retail Store Credit Cards of August 2021". https://www.creditcardinsider.com/best-credit-cards/retail-store-credit-cards/
Credit Karma. "Retail store credit cards". https://www.creditkarma.com/credit-cards/retail-credit-cards
Jason Steele is a leading expert on credit cards. His work has been featured on Business Insider, MSN Money and Yahoo! Finance, as well as on The Points Guy.