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Retail rewards cards: Stores give points and more

Department stores go beyond one-time discounts to build loyalty

By Ben Woolsey and Emily Starbuck Gerson

Signing up for a store credit card was once a terrible idea. The usual initial 10 percent off for signing up was beneficial when making a hefty purchase, but you were stuck with a crippling APR and few, if any, continuing perks. You also could not use the card anywhere except that one retailer.

Now the marketplace is flooded with a new breed of store credit cards, which offer reward programs and frequent promotions to carry sustained value. Additionally, many are now co-branded with major payment networks, so the cards can be used to shop anywhere. For some consumers, however, store cards can still be a financial detriment.

Co-brand convolution
Most major retailers, such as Barnes & Noble, Bloomingdale's and Kroger, now have their store cards co-branded with a major payment network (i.e., Discover, American Express, Visa or MasterCard), so these cards can be used for purchases with any merchant accepting cards in that network. These co-branded cards often still provide the infamous first-purchase discount, but most now have ongoing programs very similar to regular reward credit cards (gather points and redeem rewards) and cash back credit cards (earn rebates from purchases) that encourage long-term loyalty rather than a one-time spending spree.

A few high-end retailers, such as Victoria's Secret, Barneys New York and Neiman Marcus, still only have cards that are not branded with a payment network, though some offer rewards and ongoing promotions to keep customers coming back.

A CreditCards.com survey of the payment cards offered by 25 of the nation's top retailers revealed that 10 of the 25 companies offer both a co-branded and nonco-branded card solution. The difference between the two types of cards varies radically from store to store. The Toys R Us/Babies R Us co-branded and nonco-branded cards partake in the same reward program; the only difference is the co-branded card can earn points on purchases outside of the issuing retailer, whereas the nonco-branded card can only rack up points in Toys R Us and Babies R Us because it is not accepted outside these stores.

For other retailers, however, the co-branded cards are the only ones with real perks; the nonco-branded are no-frills and primarily for those with bad credit or who need a one-time financing vehicle. At Best Buy, Home Depot, Wal-Mart and Office Depot, the co-branded cards earn rewards, but the nonco-branded merely provide more flexible financing options. If you regularly shop at Home Depot and can rack up some major reward points over time, the co-branded option with ongoing rewards is ideal. If you never visit Best Buy, but need financing to buy an expensive washer and dryer set once, the nonco-branded card may be preferable.

Atrocious APRs
The main dangers with store cards are the abnormally high interest rates. According to the CreditCards.com rate report on June 5, 2008, the average APR for a regular reward credit card is 11.97 percent. The survey of credit cards offered by major retailers proves that while store cards may offer more promotions and discounts, the APRs are much steeper -- sometimes 50 percent higher than general use cards.

Most co-branded store cards offer APRs ranging from 12 percent to 20 percent based on the applicant's credit history -- and only those with excellent credit history will be lucky enough to get a rate below 15 percent. For the nonco-branded store cards, however, it's rare to see an APR lower than 20 percent. Some are upward of 23 percent, which is actually near the penalty APRs that apply when consumers default on their payments on nonstore credit cards.

If you carry a balance on store cards, the repercussions can be staggering. A retail credit card's high APR may only be worth it if you shop at that retailer frequently enough to make good use of the rewards and promotions and do not carry a balance month-to-month.

How store cards affect your credit
Opening a store card will certainly affect your credit, though it is debated as to whether it is helpful or hurtful. It is true, though, that having too many credit inquiries on your credit report can wreak havoc on your credit score, as can opening too many accounts or mismanaging a card.

Gail Cunningham, spokeswoman for National Foundation for Credit Counseling based in Silver Spring, Md., says, "Having a store credit card should not hurt your credit score if you handle it responsibly." In fact, if used prudently, a store credit card can even boost your credit: "The credit score likes to see a variety of types of open credit, thus having a store credit card could help add to the mix," Cunningham says. She also says people usually get the cards only when they cannot get another card or when the store offers a percent off a purchase. "Taking advantage of a percentage off only puts more plastic -- think temptation to spend -- in your wallet," Cunningham says.

Craig Watts, spokesman for Fair Isaac Corp., the company that created the FICO score, concurs with Cunningham: "The presence of a store credit card on a person's credit report will not by itself raise or lower the person's FICO score." Why might your credit score go down from a store card? If payments to the account are delinquent, your credit score is in trouble, Watts says. "Or perhaps if the consumer has just opened that card account a month ago, which could cause the score to go down at least slightly. This is because opening a new account almost always increases a consumer's credit repayment risk at least slightly for the next several months," he adds.

In addition to the effect of multiple inquiries on your credit report is the added negative effect of having multiple approved store credit cards in your wallet. Store credit cards provide a way to run amok with purchasing power in very tempting environments where the sole purpose is to get you to spend.

Plastic poor
Christine Moriarty, president of MoneyPeace, a financial counseling and planning service in Bristol, Vt., believes most consumers are better off without store credit cards. "There seldom is a good reason or justification for the store card," she says. "There was once an advantage to a store card because Visa and MasterCard were not so common. Now having a separate store card gives you specials, but no real financial advantage. The card becomes one more debt source to manage and one more company on your credit report."

It's even worse if you have multiple store cards. Moriarty says having too many credit cards can leave the user "plastic poor." This is a term she uses for "people who are constantly overspending or do not know where they stand because though there is money in their checkbook, the monthly credit card bill is beyond the money they have. So they use plastic, but do not manage their plastic or their money."

If you plan to have just one or two store cards for the retailers you visit most frequently, it may be helpful in terms of the money you'll save and rewards you'll earn. But if you get a store card at every retailer that asks you to apply (which will be every one that carries a card -- retail employees have a quota of applications to meet, according to The Consumerist)  you will look risky to lenders by having so many additional lines of credit open on your credit report. Consider alternatives, such as finding out if the retailer has a mailing list that will send you special offers or discounts and searching for coupons online and in the newspaper.

A great deal for the retailers, but maybe not you
Consumer Reports, a consumer advocacy publication, says consumers should not register for any store card program before they thoroughly read what it offers. The fine print may make the perks of the card less desirable. Additionally, if a shopper gets a store card, he or she should read the statements carefully to catch mistakes and changes in the program, which happen often. Consumers may also find a discount coupon attached to the bill to encourage more shopping, which is becoming a more common practice, the publication says. Additionally, if you miss payments or pay late, not only will you face late fees and finance charges, but your reward points may disappear, too.

Before you pounce on the discount that comes with opening a store card, you should strongly consider your financial needs. If you truly need additional credit, instead shop around for a low interest rate credit card. If it's rewards that you seek, many reward cards allow consumers to earn cash back, air travel, hotel stays, gift cards and merchandise. All these cards can be used at millions of locations worldwide, while nonco-branded store cards cannot.

It is comforting to know, however, that you are still protected against theft on your store credit card, regardless of whether it is co-branded. Under the Fair Credit Billing Act, the maximum liability consumers have for unauthorized purchases on their credit cards is $50. If the loss is reported before any fraudulent charges are made, the card issuer cannot hold you responsible. If the card numbers were used fraudulently, but you still have the physical card in your possession, you also have no liability for such purchases.

Store credit cards may look like a bargain on the surface, but they are generally a much better deal for retailers than for consumers. Store credit cards drive increased sales, loyalty and profits for store owners, who have realized there is as much money to be made in selling credit as there is in selling consumer goods.

Retail rewards cards

Store  APR  Co-branded? Co-brand Reward/perks
7-Eleven Ranging from 11.99% to 19.99% Yes Visa Apply today and earn 10% on purchases at 7-Eleven and 2% anywhere else for first 60 days. From then on, earn 3% on purchases at 7-Eleven and 1 percent everywhere else. Redeem rebates for 7-Eleven Rewards Cards.
Store  APR  Co-branded? Co-brand Reward/perks
Barneys 21.0% Except 18% in HI,LA,MA,MN,SC; 18% to $500, 21.0% over $500 in NE; 6.5% in AR; 18% to $750, 21.1% over $750 in AL. No n/a Get 3 percent back on up to $4,999 spent; get 4 percent back on up to $9,999 spent; get 5 percent back on up to $24,000 spent; get 6 percent back on up to $49,999 spent; get 7 percent back on up to $50,000 spent.
Store APR Co-branded? Co-brand Reward/perks
Banana Republic, Gap, Old Navy, Piperlime 21.05% One version is, one version is not Visa Earn 5% back in rewards at Old Navy, Banana Republic, Gap and piperlime.com. With co-branded, get an additional 1% on all other purchases. Receive exclusive offers throughout the year; get advance notice of sales and events.
Store APR Co-branded? Co-brand Reward/perks
Barnes & Noble Ranges from 15.74% to 21.24% based on credit history. Yes MasterCard Get free $25 Barnes & Noble gift card after your first purchase with the card. Every dollar spent earns you one reward point, and every time you reach 2,500 points, you get a $25 Barnes & Noble gift card. When you use the card for purchases at Barnes & Noble stores or website, you save an extra 5% delivered as credit on your statement. Zero percent APR on balance transfers for first six months.
Store APR Co-branded? Co-brand Reward/perks
Bergdorf Goodman, Neiman Marcus 21% No n/a Comes in three levels with increasing perks. For all cards, earn points for dollars spent, which can be redeemed for a variety of rewards. Get advance notice of double points shopping events and sales. Next levels include free dessert and coffee when dining at store restaurants, complimentary gift packaging, publication subscriptions. Top level comes with 18-karat white gold credit card engraved with your name, for starters.
Store APR Co-branded? Co-brand Reward/perks
Best Buy Co-branded ranges from 14.24% to 18.99%. Nonco-branded with deferred interest program ranges from 19.8% to 23.15%.  One version is, one version is not MasterCard Nonco-branded comes with exclusive financing offers, including no interest for 90 days on all purchases. Co-branded comes with reward program -- earn points for all purchases, though more points for Best Buy purchases. Redeem points for reward certificates that can be used at Best Buy stores. Get exclusive bonus point offers throughout the year. 
Store APR Co-branded? Co-brand Reward/perks
Bloomingdale's 22.90% Yes Visa Comes in three levels with increasing perks. For all, apply now and save 10% off today and tomorrow. Comes with exclusive travel and entertainment offers and insider membership days with savings for using your card. Spend $1,000 annually and go to next level and get 12 free gift wrappings a year, earn rewards for staying at certain hotels and other purchases, and receive certificates to use like cash. Spend $2,500 annually for next level and get inside access to events and offers, free local delivery of most merchandise, reward points and an exclusive toll-free customer service line.
Store APR Co-branded? Co-brand Reward/perks
Cabela's 9.99% for Cabela's purchases, 12.99% for all other purchases Yes Visa Get approved instantly and take $20 off today's purchase. Get 2% back in Club points for all Cabela's purchases and get 1% back for all purchases elsewhere. Points don't ever expire if account is in good standing and can be redeemed for anything at Cabela's. Access to exclusive offers. 
Store APR Co-branded? Co-brand Reward/perks
Costco 0 percent for first three months, then 14.99% Yes American Express Unlimited cash back for all purchases (3% for gas and restaurants, 2% for travel, 1% everywhere else including Costco). Card also serves as Costco membership card. Flexible spending -- pay in full or over time. There is also one for business use; business owners get 2% more cash back for gas purchases and get savings at other businesses such as FedEx Kinkos, Delta, Hertz and more.
Store APR Co-branded? Co-brand Reward/perks
Expo Design Center, Home Depot Nonco-branded is 22.99%. Co-branded ranges from 12.99% to 18.99%. One version is, one version is not MasterCard Nonco-branded lets you have no payments and no interest for six months any time you make a purchases of $299 or more, gives you flexibility to make low monthly payments for payment in full, and comes with special promotions throughout the year. Co-branded gives you 3,500 bonus points with your third purchase. Allows you to earn 3 points for every dollar spent at Home Depot or Expo Design Center, 2 points for every dollar spent at gas stations, restaurants, grocery stores and drugstores, and 1 point for everywhere else. Can redeem points for gift cards, travel, merchandise and more.
Store APR Co-branded? Co-brand Reward/perks
JCPenney 21.99% (or 19.8% for Puerto Rico and U.S. Virgin Islands residents) No n/a Comes in three levels with increasing perks. Can be used at all JCPenney stores, JCPenney catalog or website, at CVS and Rite Aid pharmacies. When you sign up, get 10 percent off your first online purchase with the card. Receive special savings events for card members only and card member financing events. Higher levels receive special savings certificates and can choose monthly billing date.
Store APR Co-branded? Co-brand Reward/perks
Kohl's 21.90% No n/a You save 10% off all your purchases the first day you get the account. Save an extra 15%-30% percent on all regular, sale and clearance items and get 12 special savings events per year, which can allow you to save as much as $100 annually. If you spent at least $600 on your Kohl's card annually, six times a year you get to pick your personal sale day and receive other special offers that can allow you to save as much as $170 annually.
Store APR Co-branded? Co-brand Reward/perks
Kroger Ranges from 9.74% to 18.74% based on credit history Yes MasterCard Zero percent APR on balance transfers for 12 months. Earn 3 points for every dollar spent on Kroger brand products, earn 2 points for every dollar spent in Kroger family of stores, earn 1 point per dollar spent outside of Kroger stores and fuel centers. Doubles as your shopper's card. Get rewards every 1,000 points and use for free groceries.
Store APR  Co-branded? Co-brand Reward/perks
Lowe's 21.99% for credit card; for project card, for first project window, rates range from 7.99% to 17.99% No n/a Two options: Lowe's credit card and Lowe's project card. Credit card has no initial qualifying purchase, has special deferred payment promos throughout the year, low monthly payments. For project card, you have a six-month period to make all your project window purchases during which no payments are due and no interested accrues, low fixed monthly payments (though requires $1,000 initial qualifying purchase).
Store APR Co-branded? Co-brand Reward/perks
Macy's 22.90% Yes Visa Comes in four levels based on annual spending with increasing perks. Apply now and receive 10% off today and tomorrow. Access to monthly cardholder-only savings events. Easy returns even without receipts for up to 180 days if purchased at Macy's with card. Higher levels earn reward certificates and free services such as gift wrap, basic alterations and package delivery.
Store APR Co-branded? Co-brand Reward/perks
Meijer (credit) Ranges from 12.24% to 19.24% for co-branded, is 20.45% for nonco-branded One version is, one version is not MasterCard Both cards get 10% off first entire Meijer purchase, 10 cents off every gallon of Meijer gas (through 9/1/08), earn 1% for Meijer Community Rewards, get up to 5% of select products toward college savings with Upromise, access to exclusive savings events. Additionally, co-branded is accepted worldwide, earns points to get cash back at Meijer and gets fast check out with contactless technology.
Store APR Co-branded? Co-brand Reward/perks
Meijer (prepaid) n/a Yes MasterCard Can be used at Meijer or anywhere else that accepts MasterCard. Can reload for free at Meijer locations by buying a Green Dot MoneyPak at Meijer locations or other retailers or reload free by direct deposit. Works like a debit card but does not require a bank account. Can track your spending online and use it to pay bills. Easier than checks and safer than cash. Monthly maintenance fee is $4.95, every domestic ATM cash transaction is $1.95, and the initial card purchase is $9.95.
Store APR Co-branded? Co-brand Reward/perks
Nordstrom (credit) Ranges from 5% to 19.9% Two are, two aren't Visa All cards earn reward points for every dollar spent with Nordstrom. Co-branded cards earn addition rewards for dollars spent with all other merchants, but nonco-branded cards can be used only with Nordstrom. All earn double points during half-yearly and anniversary sales and get a $20 Nordstrom certificate for every 2,000 points.
Store APR  Co-branded? Co-brand Reward/perks
Nordstrom (debit) n/a Yes Visa Earn reward points for purchases with any merchant, but earn double points when shopping with Nordstrom and during half-yearly and anniversary sales. When you accumulate 2,000 reward points, you get a $20 Nordstrom certificate. Earn interest on money in account and can invest it in a CD.
Store APR  Co-branded? Co-brand Reward/perks
Office Depot Ranges from 10.99% to 19.99% for co-branded, 22% for nonco-branded One version is, one version is not Visa With Visa, get 5% back in rebates on all Office Depot purchases and 1% back in all other purchases. With nonco-branded, you have payment flexibility -- make minimum monthly payments or pay in full. Also, pay no interest or payments for six months on qualifying purchases of $299 or more. With co-branded, 0% intro APR on purchases and balance transfers. 
Store APR Co-branded? Co-brand Reward/perks
Saks Fifth Avenue Ranges from 11.99% to 17.99% Yes MasterCard Receive 10% discount on all purchases the first day you use the card. Get pre-sale notifications, invites to in-store shopping events, earn reward points for all purchases. Free shipping on Saks.com and catalog orders.  Get $25 Saks gift card with first purchase outside Saks. Complimentary companion airline tickets and upgrades.
Store APR Co-branded? Co-brand Reward/perks
Sears, Kmart 22.15% No n/a With this card, you can shop at all Sears stores, Kmart stores, Lands End, The Great Indoors, AOL and Avis Rent a Car. If you forget your Sears Card at home, show ID and you will be provided with a temporary shopping pass. Can return items you bought with Sears card without receipt. Get exclusive cardholder-only sales and special financing offers.
Store APR Co-branded? Co-brand Reward/perks
Staples 21.96% No n/a No interest and no payments for six months on purchases of $299 or more. Earn Staples rewards in which you will earn 10% back on certain purchases. Also, access to members-only savings events where you earn more 10%-back rewards.
Store APR Co-branded? Co-brand Reward/perks
Target (credit) Ranges from 10.24% to 19.24% for co-branded, 21.24 percent for nonco-branded One version is, one version is not Visa Both cards can be used in Target stores and on Target's website, though only the co-branded can be used at other retailers. Both give you 10% off for a day of shopping at Target when you are first approved, let you earn reward points that can be redeemed for discounts, and give you 10% off pharmacy purchases when bought with the Target card.
Store APR Co-branded? Co-brand Reward/perks
Target (debit) n/a No n/a Get points for shopping -- 1,000 points will get you 10% off a purchase. Buy a prescription at Target with your card and get 10% off. The card can be used at Target stores only (and not online), but your Target purchases are deducted from your existing checking account, and you can request up to $40 cash back at checkout.
Store APR Co-branded? Co-brand  Reward/perks
TJX (A.J. Wright, HomeGoods, Marshalls, TJMaxx) 18% for nonco-branded, ranging from 10.99% to 19.99% for co-branded One version is, one version is not MasterCard Both cards earn points for every dollar spent at TJX stores. Co-branded card also earns points for dollars spent at any other merchant. With both cards, get 10% off first in-store purchase with card, get $10 store certificate for accumulating 1,000 points, and receive exclusive benefits throughout the year.
Store  APR Co-branded?  Co-brand  Reward/perks
Toys"R"Us and Babies"R"Us 20.99% for nonco-branded, ranges from 11.99% to 20.99% for co-branded One version is, one version is not MasterCard Earn 4 points for each dollar spent at Toys"R"Us or Babies"R"Us, and with MasterCard, earn 1 point for every dollar spent elsewhere. Get a 10% reward savings certificate for Toys"R"Us or Babies"R"Us when you earn 1,000 points (you can receive up to two certificates a month).  With MasterCard, get 0% APR for first six months.
Store  APR  Co-branded?  Co-brand Reward/perks
Wal-Mart Ranges from 11.87% to 20.87% for co-branded, ranges from 11.62% to 21.62% for nonco-branded One version is, one version is not Discover Co-branded card earns 1% cash back on all purchases. Both cards allow you to get up to $100 cash advance when you make a purchase and give you a 3 cent discount per gallon of gasoline at participating Wal-Mart gas stations. No interest paid for 12 months for purchases of $250 or more.

Published: June 16, 2008



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Credit Card Rate Report

Updated: 10-25-2014

National Average 15.07%
Low Interest 10.37%
Business 12.80%
Balance Transfer 12.82%
Student 13.14%
Cash Back 14.98%
Reward 15.05%
Airline 15.46%
Bad Credit 22.73%
Instant Approval 28.00%

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