This is a guest post by Mr Credit Card from AskMrCreditCard.com. Mr Credit Card has a credit card review site where you can apply for credit cards. Today, he is going to educate us on whether brand specific retail credit cards are worth getting.
When you head to a department store, whether it is a Sears, Best Buy or Victoria Secrets, chances are that when you check out and pay, the cashier will ask you if you want to get their “branded credit card”. You will be offered discounts for your first purchase! Many times, it is extremely tempting to go ahead and pick up such a card. But more often than not, getting these “branded” cards does not make sense. But first, let’s look at how they entice you.
The Benefits of Branded Retail Credit Cards
Reward Points – The branded cards allow you to earn points for every dollar that you spend on the card. Most of the time, you simply exchange points for gift cards which you can use at stores.
Discounts on First Purchase – This is what most people fall for. Let’s say you make a huge purchase; now the cashier will tell you that once you are approved, you’ll get 10% off. When the bill is $200, 10% off looks like a no brainer!
Free Shipping – Branded store cards (such as those by GAP and other similar retailers) offer free shipping when you use them. If you shop online and rack up a certain amount on these cards, you get free shipping. This is a helpful feature if you often buy stuff online.
Periodic Sales – Here’s another benefit of branded store cards: they offer occasional discounts to their card holders. This benefit is not available to anyone else.
Periodic Financing Deals – Aside from discounts, some store cards will give periodic attractive financing terms (sometimes 0% APR) to card holders if they buy stuff above a certain amount by a certain date. These promotions are popular with some folks.
Will Accept Folks With Bad Credit – There are two types of branded retail cards. The first type is a store card that can only be used at that retail store. It is not a Visa or MasterCard. The second type is a branded store card that is issued as a Visa or MasterCard. The non-Visa or Mastercard store cards are popular with people with poor credit history and folks who have just come out of bankruptcy. This is because it is relatively easy to get approval for these cards.
The Disadvantages of Branded Retail Cards
High Interest Rates – Most of these cards have high interest rates. The APR for these cards won’t be in the single digits. In fact, Home Depot mentions on their site that only half of the applicants of their Home Depot credit card get an APR of less than 25.99%!
No real benefit to use outside their stores – If you have a store card, you can only use it at that particular store. If you have their Visa or MasterCard, these cards are pretty much redundant with other cards that you may already carry. So what other use do these cards serve? It’s often the case that many folks get many store cards needlessly.
Their rewards are available in other programs – The biggest argument against store cards is that you do not need such a card to get special perks. Most of the retailers and hotel chains that offer branded cards are guilty of robbing their own cards of their exclusivity. Let’s look at a few examples:
Marriott Hotel has a credit card which is co-branded with Chase. But most credit card rewards programs already allow you to earn and redeem points for visits and stays at Marriott Hotels! Another example is the Best Buy credit card, which allows you to earn 4% rebates when you use this card at Best Buy stores. But by using the Discover Card instead, you’ll earn 5% rebates when you shop at BestBuy.com!
Another example is the Sears credit card. You can earn double points if you have the card and enroll in the Sears Choice Rewards Select Membership program. But this costs $25 annually. With the no annual fee Discover Card, you earn 5% cash back for shopping at Sears.com!
So these are just a few examples of branded retail cards that have become redundant because their issuers have robbed the exclusivity of these cards by partnering with other credit card programs!
Should You Get Branded Retail Credit Cards?
More often than not, the answer is no. But there are some exceptions. For example, I know someone who’s been visiting Disneyland annually for the last 10 years. His family just loves it! So someone like this may benefit from carrying a Disney card. But even if you shop frequently at a store (say Sears), it’ll be hard to justify spending enough to earn the rewards from this card. Because you can earn cash rebates from so many other credit cards, it simply does not make sense to get store cards.
But what if you have poor credit or have just come out of bankruptcy, and are looking for a card? Many retail stores will be happy to issue you their store cards. But you’ll have the inconvenience of only being able to use them exclusively at their store. A better alternative for you may be to pick up a secured credit card.