Give Me Back My Five Bucks

Do you have a store credit card?

We’ve all been in this scenario before: as you approach the cash register to pay for your purchase, the clerk tempts you with an additional 20 per cent off your purchase if you sign up for their store credit card. And even though you know you don’t need another credit card, and you rarely ever shop at the store, you can’t help but waiver just a little bit. After all, everybody likes saving money, right?

Store credit cards can be enticing, especially when they offer a deep discount on the initial purchase, a rewards program for frequent shoppers, or a “no payments” plan for a certain time period.

When I was 19 years old, I applied for a Sears card with a $500 credit limit. As a promotion, I received $10 off my first purchase, which might not seem like a big discount, but to a teenager making minimum wage, it represented over an hour’s worth of work. I also earned rewards for my spending – I’m pretty sure it was 2%. To me, this was the dream scenario. Not only did I work at Sears (and was able to get an employee discount, plus first-hand knowledge of sales), but I was also excited to have my own credit card. It made me feel grown up.

I thought I would be able to handle such a small credit limit, and I told myself if I ever made purchases on my Sears card, I would pay off the balance immediately at the cash register. But when Christmas came that year, I ended up maxing my Sears card in order to buy presents. And it wasn’t until four years later that I completely cleared the balance and canceled the card.

The Sears card was my first and last experience with a store credit card.

Related: What loyalty cards do you carry in your wallet? 

If you are a frequent shopper at a store, and are able to keep a zero balance every month, a store credit card can be a good way to save money. But for the rest of us, here are four reasons (from my own personal experience) why store branded credit cards are not a good idea:

High interest rates

Most of the time, a store-branded credit card will have an interest rate that is much higher than a regular card – with rates generally between 20 to 30%.

Additionally, store credit cards will often have a very tiny minimum payment, usually under three per cent. My Sears card had an interest rate of 29.90% and a minimum payment of $10 or one per cent of the new balance – whichever was greater.

Low benefits

You usually won’t benefit from the rewards program associated with a store-branded credit card unless you are a frequent shopper.  For example, the Sears card offered a $10 gift certificate for every 1,000 Sears points earned. At a rate of 2 point for every dollar spent, there are plenty of no-fee credit cards available with similar, and more flexible rewards systems.

Forced to shop in one place

When I had my Sears card, I felt more of an urge to shop there because I knew I could put my purchases on my store credit card. Even if I could have found what I was looking for at a better price somewhere else, I didn’t have the cash to buy it at the cheaper price.

Your credit score

Even if you pay your balance in full every month, many different things can affect your credit score, and that includes opening and closing credit accounts. Receiving a small discount by opening up a store credit card is not worth the potential headache and problems you could run into if your credit score prevents you from getting a good mortgage rate in the future.

What has been your experience with store-branded credit cards?

Author: Krystal Yee

I’m a personal finance blogger and marketing professional based in Vancouver. I’m a former Toronto Star (Moneyville) columnist, author of The Beginner’s Guide to Saving and Investing, and co-founder of the Canadian Personal Finance Conference. When I’m not working, you can usually find me running, climbing, playing field hockey, or plotting my next adventure.


  1. Melissa says:

    Your last point is something I wish I knew about ages ago.

    A couple of years ago, I had just finished school and was looking to start building up my credit. I was an authorized user under my mum’s credit card account but was essentially starting from zero. I was approached / enticed numerous times by stores like Sobeys, Superstore, and Sears. I had zero credit and was applying to all of these different cards but they kept rejecting me (because I had no established credit in the first place). Well, I figured I’d just wait a while and try again. I think in the first year alone, I applied for at least 6 different cards and each one was rejected. I had a well paying job after graduation but it just took insanely long for my credit report to update with information to say that I am not a high risk applicant and can pay back the money. Each time you apply for more credit, it shows up on your credit report and when other lenders see this, there are going to be some raised eyebrows…

  2. Amanda says:

    I had a bad experience with Sears about two years ago that left me super pissed. I think perhaps it was just the result of poor training of that particular employee. She had asked me, “Would you like to receive a 20% discount by signing up for our club card?” She said club card and not credit card! It led me to think it was the same as the membership cards that you might join for stores like Mexx or The Body Shop, which are not credit cards at all.

  3. Debt RoundUp says:

    I only have one store credit card and we got that to save a lot of money on fencing material from Lowe’s. With it, we saved 20%, which was a lot with the amount of materials that we needed. We got 18 months of 0% and paid it off well within that time. We have not used it since and I wouldn’t get another one.

  4. Karen says:

    I have a Target card. With the discount and free shipping it comes in very handy. Oddly, this is a card that I sometimes forget to pay (2x)…so I’ve now switched to pretty much making an online payment shortly after the purchase.

  5. I recently signed up for Canadian Tire credit card since I started working for the company and will be here until the end of August on my work term. It’s the first store credit card I have registered for and I doubt I will register for any others. The high interest rates and the fact that you’re stuck using it at that particular store to get a benefit is pretty restraining. I’ll most likely cancel my Canadian Tire card once I no longer get the discount, or only use it when I purchase gas.

  6. Deasy says:

    I had a store credit card when I worked at Macy’s. It was also my first credit card, with a limit of $100. Thank god, because anything more, I would have gone crazy with spending! And with a part-time job + minimum wage, that would have been disasterous.

    After I left Macy’s though, I just snipped the card in half and have not shopped at the stores since. The high interest rate + the low benefits didn’t really entice me to keep it in my wallet.

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