Are Store Loyalty Programs a Good Way to Save Money?

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When it's time to review your expenses at the end of the month, you may notice you do the bulk of your day-to-day shopping at one or two stores. If those stores have loyalty programs, joining them could help you earn cash back or member benefits that can offset your spending. Read on to learn how loyalty programs work, when they might make sense and other ways to save on purchases.

How Do Store Loyalty Programs Work?

Store loyalty programs are a way for retailers to encourage repeat visits by offering special perks to loyal shoppers. These programs may require you swipe your card or provide an email address or phone number at checkout to access.

Loyalty program benefits might include:

  • Free gifts and early access to products
  • Free shipping on store products
  • Ongoing shopping rewards or cash back
  • Store deals exclusive to loyalty program members
  • Special offers on certain days (for example, your birthday)
  • Ability to earn points that can be redeemed for gifts or discounts

Every store loyalty program is different. At some stores, like the supermarket down the street, the loyalty program could be free to join, and there's no need to sign up for a credit card. All you need to do is fill out an application and then rack up discount savings, cash back or points each time you shop and scan your loyalty card.

In other cases, spending past a certain threshold or applying for a store card might unlock higher store rewards. For example, the Target Circle Rewards program is free and offers 1% cash back on purchases to all members, even those who don't have a card. But Target RedCard cardholders receive a higher 5% cash back in Target stores and online, and get an additional 30 days to make store returns or exchanges.

What's the Catch?

Overall, there isn't much downside to signing up for a free store loyalty program, but there are some things to keep in mind when using them. Getting member notifications about sales and deals could entice you to spend more than normal, so that's something to watch out for.

The store where you're a member may not always offer the best deals on goods—even with your member discount. That's why it's still a good idea to shop around to compare offers.

Finally, signing up for a loyalty program typically involves providing your phone number or email address, which could lead to unwanted spam or marketing emails. Some consumers may worry that the store could use a loyalty program to track their purchases.

Does It Make More Sense to Open a Store Card for Rewards?

Opening a store card for additional store perks might make sense in some cases. Store cards may be easier to qualify for than other credit cards, and using one could help you build credit as long as you pay on time and keep the balance on the card low.

Some store cards are also open-loop cards that let you earn rewards both inside and outside of the store, which could offer greater rewards incentives.

On the flip side, there are some instances where it's probably best not to open a store rewards card. For instance, if you don't do all of your household shopping in one place, a closed-loop card that you can only use in one store may provide limited rewards opportunities.

Another factor to consider is the effect it can have on your credit. Applying for a retail card typically triggers a hard inquiry that can affect your score, so you may want to avoid opening up a new card right before applying for a mortgage or car loan. Not only that, the reward incentive a store card provides might encourage you to rack up purchases you wouldn't otherwise make. A large amount of credit card debt on a store card can affect your credit as well as your budget.

Other Ways to Save on Purchases

Joining one store's loyalty program isn't the only way to save cash. Some deal aggregator sites compile offers from different retailers in one place to help you hunt for deals.

Rakuten is an example of a free site where you can earn a percentage of your money back when you shop with certain retailers, including major brands. SlickDeals and RetailMeNot are other deal and coupon sites where you can search for possible savings.

Signing up for a cash back credit card that gives money back on everyday purchases without limits could be another way to offset spending. If you're thinking about signing up for a cash back card, the best next step is shopping around to see which card might reward you most for the type of spending you do. Experian CreditMatch™ can provide personalized credit card offers and help you compare many possible options head-to-head.

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