6 Things to Know About Retail Cards This Holiday Season

Quick Answer

Retail credit cards might offer deferred interest and deep discounts that can mean substantial savings for shoppers who frequent one store during the holidays. But there are drawbacks to retail credit cards, too, including lack of flexibility and possibly higher APRs.

Happy couple in Christmas sweaters shopping online on laptop.

At Experian, one of our priorities is consumer credit and finance education. This post may contain links and references to one or more of our partners, but we provide an objective view to help you make the best decisions. For more information, see our Editorial Policy.

When you're shopping for multiple friends and family members for the holidays, leveraging the right credit card can help you get more out of your spending and save money on interest.

If you're considering opening a new credit card for the holidays, know that you have options. Retail credit cards may offer discounts and other perks to frequent shoppers, but they can also come with high annual percentage rates (APRs). Other credit cards have their own draws, such as intro bonuses and rewards.

To help you decide whether a retail credit card might be right for you this holiday season, here are six things to know about retail credit cards.

1. Retail Cards Often Have Higher APRs

When choosing a credit card, one of your first considerations should be the card's interest rate, or APR. By and large, retail credit cards have higher APRs than general-purpose credit cards. That potential for high interest charges makes it extra important to pay off your balance by the end of every billing cycle.

If you don't plan to carry a balance beyond your store card's grace period, a retail card may work in your favor. But, if you know that it could take months to pay off your holiday bills, think twice about getting a retail card with a high APR.

2. Deferred-Interest Promotions Aren't Always a Great Deal

Some credit cards give you the option to pay off your purchase over six to 12 months without paying interest. But if you're considering getting a store credit card because you want to take advantage of a deferred-interest promotion, hit pause.

Retail credit cards that offer deferred interest work differently from traditional credit cards that offer a 0% intro APR period. Typically, if you don't pay off your full balance before the deferred-interest period ends on a retail card, you'll be retroactively charged interest on purchases from the date you began using the card.

Be sure you fully understand the terms of any credit card before you apply, including retail cards. If you're choosing a retail card to take advantage of its perks, be sure you have a plan to pay off your balance before the promotional period ends.

3. Ongoing Discounts Can Mean Big Savings

Despite the downsides, store credit cards can still be a worthwhile option. In fact, if you use a store credit card and then pay off the balance before interest accrues, then the discounts you enjoy could help you save big this holiday season. That's especially true if you frequent a certain store, or multiple stores that accept the same store credit card.

An example of a versatile retail credit card is the TJX Rewards credit card, which allows you to earn a competitive rate of points at T.J. Maxx, HomeGoods, Marshalls, Sierra Trading Post and Homesense. You can also use the card anywhere MasterCard is accepted, but you won't earn as many points. You can redeem your points for gift cards at T.J. Maxx and its associated stores.

4. Getting a Retail Card Can Be Easier

Qualifying for a retail credit card can be easier than qualifying for a traditional credit card, especially a rewards credit card. While premium rewards cards typically require your credit score to fall in the good to excellent range, a retail credit card often doesn't.

That can make a retail card a good entry point to building credit and reaping promotional benefits. If you keep your balance low and pay it off each month, it can help you demonstrate responsible credit behavior and qualify for more borrowing opportunities in the future.

But the opposite is also true. If you're not used to responsibly managing credit, then a retail card may not ultimately help you build credit. In fact, if you miss payments or max out your store credit card, you can expect a dip in your score. And since retail cards generally have lower credit limits overall, this is a pronounced risk. Understand what impacts your credit score before you decide to get a card.

5. General-Use Credit Cards Are More Flexible

While retail credit cards can be worthwhile if you'll do a large amount of your holiday shopping at the same store and then pay off the balance, they aren't always the best option.

If you want more flexible benefits and access to a wider range of rewards, other types of credit cards may be better bets. Credit cards offer different benefits that you can leverage to get more out of your holiday shopping. Some cards offer a combination of these benefits:

  • Opportunities to earn cash back, points or miles: Rewards credit cards provide an added value when you make purchases, which can help your holiday spending go further.
  • Introductory bonus: Intro bonus credit cards can be a good choice for holiday shopping, as you'll have an easier time meeting the required purchase amount to qualify for the bonus.
  • Introductory 0% APR period: Some cards may offer a longer 0% promotional APR than a deferred-interest retail card—and you'll only pay interest on the remaining balance, if there is one, after the promotion ends.

6. It's Important to Use a Budget Alongside Your Card

The season of giving may be upon us, but going into debt buying gifts could leave you with post-holiday blues that last far into the new year—and do damage to your financial stability overall. After all, shopping with a retail credit card could make you feel like you have more room in your holiday shopping budget than you really do. That's a big risk to your finances.

To be safe, follow this rule: If you aren't sure that you'll be able to pay it off relatively quickly, don't charge it. Instead, use a budget with your credit card to avoid overspending and know when interest will kick in to avoid incurring charges.

Credit Cards Work Best When You Have a Strategy

Putting your holiday shopping on a credit card isn't necessarily a bad plan, but retail credit cards aren't your only option. Be particular about which credit card you apply for. Choose a card that will give you the most bang for your buck. Start by checking your credit score for free through Experian to see where you fall on the spectrum of creditworthiness.

Then explore credit cards with holiday shopping perks such as a 0% introductory APR or cash back rewards. Experian CreditMatch™ can help pair you with credit cards that you're likely to qualify for—and that may boost your holiday shopping power.