Store Credit Cards vs. General Credit Cards: Pros and Cons

Introduction

Credit cards come in many forms, but two of the most common types are store credit cards and general credit cards. While both offer financial flexibility, they cater to different spending habits and financial goals. Store credit cards, such as the Amazon Store Card or the Target REDcard, are designed for use at specific retailers, often providing exclusive discounts and rewards. General credit cards, like the Citi Double Cash Card or Wells Fargo Active Cash Card, offer broader acceptance and rewards that apply to a variety of purchases.

Choosing between a store credit card and a general credit card depends on your shopping habits, credit history, and financial needs. Understanding the pros and cons of each option is essential before making a decision. This article will break down the benefits and drawbacks of both types of credit cards, helping you determine which one is right for you.

What Are Store Credit Cards?

Store credit cards are credit cards issued by retailers, designed for use at a specific store or group of stores. Some store credit cards are closed-loop, meaning they can only be used at the issuing retailer, while others are co-branded with Visa, Mastercard, or American Express, allowing broader usage.

Pros of Store Credit Cards

1. Exclusive Discounts and Promotions
• Many retailers offer special discounts, cashback, and financing options for store cardholders.
• For example, the Target REDcard provides a 5% discount on every Target purchase, and the Amazon Store Card offers special financing for large purchases.
2. Easier Approval Process
• Store credit cards typically have lower credit score requirements than general credit cards.
• This makes them a good option for individuals with fair or limited credit history.
3. Promotional Financing Options
• Many store cards offer interest-free financing for large purchases if the balance is paid within a specified period.
• For example, Home Depot’s consumer credit card provides 0% interest for six months on purchases over $299.

Cons of Store Credit Cards

1. High Interest Rates
• Most store credit cards have higher APRs than general credit cards.
• If you carry a balance, you could end up paying more in interest than you save with discounts.
2. Limited Use
• Closed-loop store cards can only be used at the issuing retailer, which limits flexibility.
• Co-branded store cards are more versatile but may not offer the best rewards outside the retailer’s ecosystem.
3. Lower Credit Limits
• Store credit cards often have lower credit limits, which can impact credit utilization ratios and overall credit scores.
• This makes them less useful for larger expenses compared to general credit cards.

What Are General Credit Cards?

General credit cards are traditional credit cards issued by banks or financial institutions that can be used anywhere Visa, Mastercard, American Express, or Discover are accepted. They come in many forms, including cashback cards, travel rewards cards, and business credit cards.

Pros of General Credit Cards

1. Wider Acceptance
• Unlike store credit cards, general credit cards can be used anywhere, making them more versatile for daily spending.
2. Better Rewards Programs
• Many general credit cards offer higher cashback rates, travel points, and other rewards.
• For example, the Citi Custom Cash Card adjusts cashback rates based on spending categories, while the Chase Freedom Unlimited offers 1.5% cashback on all purchases.
3. Lower Interest Rates and Promotional Offers
• Many general credit cards provide 0% APR introductory offers for balance transfers and purchases.
• The Wells Fargo Active Cash Card, for instance, offers 0% APR for 15 months, making it a great option for large purchases.
4. Higher Credit Limits
• General credit cards usually offer higher credit limits, which can improve credit utilization ratios and boost credit scores.

Cons of General Credit Cards

1. Stricter Approval Requirements
• Unlike store credit cards, general credit cards often require a higher credit score for approval.
• Premium cards, such as the Amex Platinum or Chase Sapphire Preferred, require good to excellent credit (700+).
2. Fewer Retail-Specific Perks
• While general credit cards offer broad rewards, they may not provide the exclusive retailer discounts found on store credit cards.
3. Annual Fees on Some Cards
• Many general credit cards, especially those with premium perks, come with annual fees.
• For example, the American Express Platinum Card charges $695 annually but offers premium travel rewards.

When to Choose a Store Credit Card

A store credit card is a good choice if:

• You frequently shop at a specific retailer and can maximize exclusive discounts.
• You have a limited credit history and need an easier approval process.
• You plan to take advantage of special financing offers on large purchases.

For example, if you frequently shop at Amazon, the Amazon Store Card provides cashback and financing benefits that a general card may not match.

When to Choose a General Credit Card

A general credit card is better if:

• You want flexibility and the ability to use your card anywhere.
• You prefer higher rewards across multiple categories, such as travel, dining, or groceries.
• You carry a balance and want a card with low interest rates or balance transfer options.

For instance, the Citi Double Cash Card offers 2% cashback on all purchases, making it a great choice for maximizing rewards.

FAQs for Store Credit Cards vs. General Credit Cards – Pros and Cons

1. What is the main difference between store credit cards and general credit cards?

Store credit cards are designed for use at specific retailers, while general credit cards can be used anywhere that accepts major payment networks like Visa, Mastercard, or American Express. Store credit cards often offer exclusive discounts, special financing, and rewards tied to a particular retailer, making them ideal for loyal shoppers. However, they usually come with higher interest rates and limited usability.

General credit cards, on the other hand, offer broader acceptance and flexible rewards, such as cashback, travel points, or miles. They typically provide lower APRs, better fraud protection, and higher credit limits. However, they may have stricter approval requirements and annual fees. Choosing the right card depends on your spending habits—if you frequently shop at a specific retailer, a store card may be beneficial, whereas a general card is better for versatility and overall rewards.

2. Are store credit cards easier to get than general credit cards?

Yes, store credit cards are generally easier to obtain than general credit cards. Retailers often approve applicants with fair or limited credit history, making store cards a good option for building credit. Many store credit cards do not require high credit scores, making them accessible to people who are just starting their credit journey.

General credit cards, however, typically require a higher credit score for approval, especially for premium rewards cards like the Chase Sapphire Preferred or Amex Platinum. Some general cards offer secured or student credit card options, but overall, they have stricter approval requirements than store credit cards. If you have a low credit score, a store card might be easier to obtain, but it’s important to watch out for high interest rates and limited usage.

3. Do store credit cards help build credit like general credit cards?

Yes, store credit cards can help build credit if used responsibly. Just like general credit cards, they report payment history to major credit bureaus (Experian, Equifax, and TransUnion). Making on-time payments and maintaining a low balance will improve your credit score over time.

However, store credit cards often come with lower credit limits, which can affect your credit utilization ratio—a key factor in determining your credit score. If you carry a high balance relative to your credit limit, it may negatively impact your credit score.

General credit cards often offer higher credit limits and better credit-building opportunities. They also provide more flexibility in spending, allowing you to manage your credit utilization better. If you’re looking to build credit effectively, a mix of store and general credit cards may be beneficial.

4. Do store credit cards have higher interest rates than general credit cards?

Yes, most store credit cards have higher interest rates (APRs) than general credit cards. The average APR for store credit cards ranges between 25% and 30%, whereas many general credit cards offer lower rates, sometimes as low as 15% to 20%.

Store credit cards often tempt users with promotional financing offers, such as zero interest for a set period. However, if the balance is not paid off within the promotional timeframe, interest may be retroactively applied, leading to high costs.

General credit cards usually have lower APRs, especially if you qualify for a good credit card with a strong credit score. Some general credit cards also offer 0% APR introductory offers on purchases and balance transfers, making them a better option for long-term financing.

5. Can store credit cards be used anywhere, or only at specific stores?

Store credit cards come in two types: closed-loop and co-branded.

• Closed-loop store credit cards can only be used at the specific retailer that issued them. For example, the Amazon Store Card can only be used for Amazon purchases, and the Best Buy Credit Card is limited to Best Buy transactions.
• Co-branded store credit cards are backed by major networks like Visa, Mastercard, or American Express, allowing them to be used anywhere those networks are accepted. Examples include the Amazon Prime Rewards Visa and the Costco Anywhere Visa.

If you want broader spending flexibility, a general credit card or a co-branded store card is a better option than a closed-loop store card.

6. Are store credit cards worth it for frequent shoppers?

Yes, if you frequently shop at a specific retailer, a store credit card can be highly valuable. Many store credit cards offer exclusive discounts, cashback, and financing deals. For instance, the Target REDcard provides 5% off all Target purchases, while the Amazon Store Card offers special financing options on large purchases.

However, store credit cards are only worth it if:

• You shop regularly at the retailer.
• You pay off the balance in full each month to avoid high interest rates.
• You take advantage of exclusive perks, such as early access to sales and financing offers.

If you don’t shop at a specific store frequently, a general cashback or rewards card might be a better option for earning rewards across multiple spending categories.

7. Do general credit cards offer better rewards than store credit cards?

Yes, general credit cards typically provide better overall rewards than store credit cards. While store credit cards offer retailer-specific perks, general credit cards provide cashback, travel points, and flexible rewards across various spending categories.

For example, the Citi Custom Cash Card offers 5% cashback on your highest spending category each billing cycle, while the Chase Freedom Unlimited provides 1.5% cashback on all purchases. These rewards apply to all purchases, unlike store credit cards, which only reward spending at the specific retailer.

If you prefer flexibility in earning and redeeming rewards, a general credit card is the better choice. However, if you frequently shop at one retailer, a store credit card’s exclusive perks might be more beneficial.

8. Can you have both a store credit card and a general credit card?

Yes, many people have both store and general credit cards to maximize their financial benefits. Having a store credit card can help you save on retailer-specific purchases, while a general credit card provides broader spending flexibility and rewards.

For example, a consumer might use a Target REDcard for 5% savings at Target but rely on a Citi Double Cash Card for all other purchases to earn 2% cashback.

If you decide to hold both types of cards, make sure to:

• Manage your payments responsibly to avoid high interest.
• Monitor your credit utilization ratio to maintain a good credit score.
• Take advantage of store-specific perks while using a general credit card for non-store purchases.

9. Do store credit cards come with annual fees like general credit cards?

Most store credit cards do not have annual fees, which makes them appealing for occasional shoppers or credit builders. However, some co-branded store cards, such as the Amazon Prime Rewards Visa, require an Amazon Prime membership, which carries an annual fee.

General credit cards vary in terms of annual fees. Some, like the Wells Fargo Active Cash Card, have no annual fee, while others, such as the American Express Platinum, charge $695 annually but offer premium travel benefits.

If you prefer no annual fees, store credit cards and no-fee general credit cards are good options.

10. Which type of credit card is better for long-term financial health?

For long-term financial health, a general credit card is typically the better option. General credit cards:

• Offer lower interest rates and higher credit limits.
• Provide better rewards and cashback opportunities.
• Help with building credit by offering higher spending flexibility.

However, a store credit card can be useful if you:

• Regularly shop at a specific retailer.
• Want exclusive discounts and promotions.
• Are building or repairing credit.

For the best results, consider using both responsibly to maximize rewards and maintain strong credit health.

Conclusion:

Both store credit cards and general credit cards have their advantages and disadvantages. Store cards are great for frequent shoppers at a specific retailer, while general credit cards offer more flexibility and better overall rewards.

If you are building credit, a store credit card can be an easier way to qualify. However, if you want higher limits, lower interest rates, and better rewards, a general credit card is the smarter choice. Consider your spending habits, credit score, and financial goals before making a decision.

For the best financial strategy, many consumers use both types of credit cards, taking advantage of store discounts while maximizing cashback and rewards from general credit cards.

Top of Form