Merchant Credit Cards: The Research You Should Be Doing

Merchant credit cards, those store-specific cards that cashiers are always asking you to sign up for, are ubiquitous. It can be difficult for regular shoppers to even remember the last time they bought something from a retailer and were not propositioned by a sales clerk, asking if they wanted to save 10% (or more!) by signing up for a store credit card. In the heat of that retail therapy moment, getting a discount may seem like a great idea. Although everyone loves a deal, there is usually a lot more to store credit cards than meets the eye. Let’s look at some of the pros and cons of merchant credit cards before we talk about what you should know before you say yes.

License: Creative Commons image source
License: Creative Commons image source


  • Discounts and store perks are probably the biggest “pro” for signing up for a store card. They’re the reason we do it! The main selling point for these cards is that you, the customer, get the instant gratification of a good deal. For signing up and using the card on the spot, you usually get at least 10% off the purchase, but sometimes retailers offer 20% or 30% off, which is definitely a good deal. There are usually other perks that come with signing up for a store card, like getting special offers or privileges. For example, Macy’s offers cardholders the ability to make returns without a receipt. Other stores might have a way to earn points towards free items, or offer special coupons for future purchases.
  • Introductory rates are the other main perk of store cards. Retailers get you to sign up by offering deals like 0% interest for 6 months or very low rates for a short period of time. These are great deals if you know you can pay off your balance before the rates go up.
  • Special offers usually come in the form of coupons or limited-time savings events. These can be great if you are already a frequent customer! You can plan your regularly-scheduled shopping around such events to save money. However, you should know that you can get many of the same special offers just by joining the store’s mailing list.
  • Flexibility for using the merchant card wherever you want is offered by some retailers. If the card comes branded with a Visa, MasterCard, American Express, or Discover logo, then you can use the card any place where such cards are accepted.
  • Doubling bonuses with other cards is sometimes a possibility with merchant cards. If you have some kind of loyalty or rewards card with the company, you may get extra points by using your store credit card, which would result in even more deals.
  • Your credit history can benefit from using merchant credit cards if you are careful. Often, stores will grant a line of credit where other banks may not, so if you’re having a hard time building credit, a store card may be a good option. A long standing merchant credit account can boost your credit score, making it possible to get other lines of credit in the future.


  • Your credit score can go down if you’re constantly applying for merchant cards. You might be thinking, “You just said I could build credit history!” This is true, but every time a potential creditor checks your credit history, your FICO credit score can take a hit of anywhere from 3-15 points. This isn’t an issue if you just get store cards once in a while, but overuse of them can drag down your score. Additionally, if you keep a lot of high balances on the cards, your credit score will be affected. For an optimal FICO score, don’t let your balance sit at more than 30% of the credit limit; for example, if the limit is $1,000, don’t run a balance of more than $300.
  • High interest rates are one of the biggest drawbacks of merchant credit cards. After the introductory period, interest rates jump, frequently to rates of 20% or more. If you choose to get a merchant card, be sure to look carefully at the terms, promotional rates, and normal rates so that you don’t end up with a higher bill than necessary.
  • Low credit limits are an issue for store cards when you actually do want to make a large purchase. Generally speaking, retailers approve credit lines of probably no more than $1,000. While $1,000 might sound like a lot, it’s pretty easy to get higher credit limits (if that’s what you look for in a credit card) from traditional sources.
  • The temptation to spend is a mighty one when it comes to store cards. You already have the credit, so why not buy something, right? Wrong! Do not let store cards be an excuse to spend more money than you would have otherwise.
  • The end of promotional periods catches many people off guard. If you sign up for a card knowing that it has six months of no interest, and you don’t pay off your purchase in that time, the interest will probably end up costing you more than you originally saved.

More to Think About

Before you sign up for a store card, do the math! You know your regular shopping haunts, so pick up promotional materials or look up the card online before you make a big purchase where you think you might want to sign up for a new credit card. You should walk into the store already knowing what the interest rates and promotions are, and you should know if you can pay off your purchase within a promotional period. If you choose to take advantage of promotional pricing, set a budget for paying off your purchase within the specified time frame. If not for a big purchase, then only consider getting merchant cards from stores where you frequently shop. If it’s a one-time purchase for a pair of shoes, the store card is probably not worth it, but if you see shoes in your future every two months, it might be beneficial. Finally, shop around for traditional credit cards, too. Many banks offer credit cards and the rewards often include cash back or airline miles. Think about your spending and budgeting priorities and have a plan before you sign!

About the Author: Angie Picardo is a staff writer for NerdWallet. Her mission is to help consumers stay financially savvy and save money with Nerdwallet’s best credit cards.

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  • I think they’re sneaky all these store cards. They sell them like thye are a major benefit, but its just another way of getting into more debt.