In How do credit card balances relate to getting a Mortgage? several people seem to assume that store-based credit cards are a bad idea. What is the reason for that? Is there something about them that I'm missing?


A little background.

We just got a Target credit card. We'd moved to a new area a couple years ago, and found that we were doing most of our shopping at the Target right around the corner from where we live. The card is 5% off all in-store purchases except for gift cards. Our other credit cards don't have better than 5% cash back.

We never carry a balance, so the rate of the card is a non-issue for us.

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    29.9% .. ouch Mar 15, 2011 at 22:18
  • @Chris: see edit Mar 15, 2011 at 22:24
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    Clark Howard actually makes an exception for the Target card, primarily because the discount happens every time.
    – MrChrister
    Mar 15, 2011 at 23:23
  • Here in Canada, I decided to get just one store card and it was for The Bay. The only reason I hold it is for the periodic extra 15% off sales for Bay card holders, which of course I promptly pay off.
    – fideli
    Mar 16, 2011 at 3:17

5 Answers 5


If you don't carry a balance, there is no disadvantage. Merchants pay less for their in-house credit, so there are often incentives for you to use the store card.

The perils of opening a credit card hurting your credit score are way overblown in general, if you have good to excellent credit. If you have excellent credit, there is no material effect on your ability to borrow. You'll get knocked down a few points when you open the card, but as long as you're not on a credit application frenzy there isn't an issue.

  • If you fail to plan, you plan to fail. I wouldn't suggest ignoring the high interest rate because you never know when the day comes you can't pay in full. +1 though.
    – MrChrister
    Mar 16, 2011 at 5:52
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    @MrChister: You have a point, but if you unexpectedly find yourself with a big bill on a standard credit card with a 10-20% rate, are you really that much better off? Mar 16, 2011 at 21:41
  • So that means it is not the case that a bank may deduct your total credit limit from the maximum amount they will allow you to borrow? As in, if your current salary and living expenses would, when viewed by themselves, qualify you for a $500,000 loan, is it the case that a bank won't say "but you've already got $50,000 in borrowing power through your credit cards, so the max we'll lend to you is $450,000"?
    – aroth
    Mar 11, 2013 at 6:21
  1. They probably limit where you shop.
  2. Too many applications for opening credit hurts your score, and people open store cards to get a deal without thinking about their credit picture.
  3. The big reward they use to lure you in is a loss leader for the store to collect high interest rates from you, costing you more in the long run.

They are not as good of an option when compared to a card you open chosen based on features and rates. Get a card with a lower rate that can be used anywhere.

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    The rate is a non-issue for us: we never carry a balance from month to month. How many applications are needed to hurt my score? This was the first CC I'd applied for in 4 years. Mar 15, 2011 at 22:20
  • @ David Oneill - the rate can be a problem in an emergency if you need to carry a balance. One application in4 years isn't a problem. Many applications in one years is. We never get to know the actual number as they don't disclose the scoring models (and there are lots of models to pick from besides.)
    – MrChrister
    Mar 15, 2011 at 23:22
  • Good to know. Mar 15, 2011 at 23:30
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    I would imagine #3 on this list (the high interest) rate is the most important reason why most of these cards are not a great idea
    – matt b
    Mar 16, 2011 at 2:22
  • @McChrister: as long as the store card isn't the only card, then you would use the lower interest rate card in the emegency, no? May 19, 2011 at 17:08

My wife and I have Gap, Kohl's and Amazon cards. They each give extra benefits when using them at their stores, and usually 1% cash back at other places, although we don't use the Gap or Kohl's anywhere else.

We don't carry a balance, so as mentioned, the rate doesn't matter. And they are so spread out when we've gotten them (Kohl's for a good 3 years, Amazon about 2 months ago) that I don't expect any issues for credit checks. In fact I just got approved for a mortgage loan, way more than what I know I can really afford.

In my mind, credit cards are a bad idea when you use them as "real" credit. If they are used more like a debit card (spending money that you have), its like a loan (you don't have to pay it off til later), and you get paid for it (whether in cash or merchandise).


The biggest reason that they are a bad idea is just because every credit application hurts your credit score, as does having too many cards.

In addition, every new card is a greater risk of identity theft.

  • "every new card is a greater risk of identity theft." Why is that? (I'm not trying to be disagreeable, I want to understand) Mar 15, 2011 at 22:24
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    having a credit card doesn't hurt your score. It does a little when you open the account. If you pay off your cards every months it may actually help your credit score.
    – Vitalik
    Mar 16, 2011 at 4:34
  • Identity theft... meh... If you see fraudulent activity, call the CC company and have them issue you a new card. Mar 16, 2011 at 14:27

Store cards also tend to have a fairly low credit limit so depending on how much money you spend on the card, your credit utilisation might be a lot higher than desirable.

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    I thought utilization was based on the total, so adding another small card would not change the total very much. Mar 15, 2011 at 22:43

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