Store credit cards explained

What are store credit cards?

Store cards are a type of credit card offered by retailers – typically big high street brands, supermarkets and even some online outlets. They’re usually designed for spending at a specific retailer (or chain), but some also let you spend elsewhere and earn rewards too.

These cards are often packed with perks such as:

• Reward points, savings, or cashback on your shopping

• Exclusive member discounts all year round

• Buy now, pay later or interest-free instalment plans.

How store cards work

With a store card, you borrow money from the card provider to buy your goods up front and then pay it back later. Here’s how it works:

• Use your card to buy from the retailer

• You'll get a monthly statement or repayment plan

• Clear your whole balance by the agreed date to avoid interest.

Store cards often charge very high interest rates so if you don’t pay off your balance in full, costs can start to quickly mount up.

Quick tip

Check if your store card provider offers an app or online banking to help you keep track of your spending.

You could also set up a direct debit to stay on top of your payments and avoid late payment fees.

Store credit cards vs. traditional credit cards

While they may look similar in your wallet, store credit cards and traditional credit cards are a bit different under the hood:

Quick tip

You can check your credit score for free with any UK credit reference agency. The big three are Equifax, Experian, and TransUnion.

Types of store credit cards

Look out for two different types of store card:

A ‘closed-loop’ card

This is the most common and can only be used at the store itself or in any of its chosen partners. Examples include cards from Argos, New Look and Next.

An ’open-loop’ card

These are store-branded credit cards that carry the Visa or Mastercard logo, so you can use them anywhere that accepts these payment networks. Examples of this type of store card include the John Lewis Partnership Credit Card and Tesco Credit Card.

Pros and cons of store cards

Make sure you weigh up the benefits and downsides of a store card before you sign up. Here’s what you need to know:

Pros

• Exclusive discounts and offers – you may be eligible for a big welcome discount or access to members-only sales as well as year-round offers

• Rewards programs – you can often earn cashback or loyalty points (to be exchanged for vouchers, for example). These can be good value if you’re a regular and loyal shopper

• Special finance deals – some cards offer interest-free periods on larger purchases but be alert to the promotion’s end date

• Eligibility – if you don’t have much in the way of credit history, you might be more likely to get accepted than with a mainstream credit card

• Credit boost – you could use a store card to start building or help improve your credit score.

Cons

• High interest rates – interest rates can go up to 39.9%. If you don’t clear your balance each month, the interest charges can quickly wipe out any rewards you earn. Also, be wary of deferred interest if you're on a payment plan and don’t clear your balance in time

• Limited use – this is especially the case with closed-loop store cards, where you can only spend in a particular store (or chain)

• Lower credit limit – you might not be able to buy much on your card before you reach your limit. A higher utilisation ratio (the percentage of your credit limit you use) isn’t healthy for your credit score

• Temptation to spend more – the lure of discounts and the potential option to pay back later could encourage you to spend more than planned.

Should you get a store card?

Whether to get a store card will come down to your personal shopping preferences and how well you look after your money.

A store credit card might be right for you if:

• You regularly shop at the store offering the card

• You can pay off the balance in full each month or by the end of the repayment plan to avoid interest

• You’ll genuinely benefit from the discounts and rewards on offer.

But it might be wiser to avoid this kind of card if:

• You’re tempted into overspending to get rewards

• You’re likely to have an outstanding balance each month, as the interest can often outweigh any perks

• You prefer a card with more flexibility and lower interest rates.

Also, remember that some retailers might offer a better deal via loyalty schemes or apps without any need to take on credit.

What are the alternatives to store cards?

If you don’t think a store card is a good fit, take a look at other options which might suit you better:

• Reward credit cards – you could potentially earn cashback, airmiles or points every time you spend. But they may charge annual fees, tend to have higher interest rates and their perks could have expiry dates

• 0% purchase credit cards – you won’t be charged interest for a set time if you keep up with your monthly repayments. This can help spread the cost of major purchases

• Loyalty cards – examples include Tesco Clubcard and Boots Advantage, which let you collect points without taking on credit.

Our simple comparison tool helps you find the right card for your spending needs. It carries out a soft search to check your eligibility without harming your credit score.

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Compare the Marked Limited acts as a credit broker, not a lender. To apply you must be a UK resident and aged 18 or over. Credit is subject to status and availability.