Retailer credit cards can offer good savings - Lexington Herald

Retailer rewards credit cards are getting a whole lot more rewarding lately, with some offering 5 percent cash back on your purchases along with other goodies.

While getting something for nothing is a smart spender’s Holy Grail, credit cards can be a dicey proposition because of their punitive interest charges on unpaid balances. Get-out-of-debt guru Dave Ramsey never recommends getting a credit card no matter how good the rewards, often saying, “If you play with snakes, you’re going to get bit.”

Still, even Clark Howard, longtime critic of store cards, recently changed his mind. Howard, who doles out money advice on TV, radio and in books, said that despite his reservations, he’s intrigued by Target-branded cards that offer a 5 percent discount. “That 5 percent is a significant enough number to make me rethink my typical advice,” he told his radio listeners.

The main consideration when thinking about applying for a retailer-branded credit card is whether you will pay off the entire balance every month, said Farnoosh Torabi, author of the book Psych Yourself Rich: Get the Mindset and Discipline You Need to Build Your Financial Life and a money expert with

That’s especially true with retailer credit cards, because they tend to have very high finance charges, many exceeding 20 percent. And if a card has an annual fee, you need to make sure you’ll make back in rewards more than the card is costing you, she said.

Another consideration is the impact on your credit scores. Opening new lines of credit temporarily lowers your scores. “You’re sending the message to the credit bureaus that you suddenly need a lot of credit, and that factors in negatively in computing your credit score,” Torabi said. And many cards have low limits, meaning you will easily use a greater percentage of your available credit, another factor that harms credit scores.

Perhaps a bigger concern is that several studies show that consumers spend more money with credit cards than they do with cash.

Despite potential drawbacks, many consumers might benefit by using retailer cards from a store where they shop most.

Here’s a sampling of lucrative retailer-branded credit cards to fit a variety of shopping tastes. Helping to compile the list were Amber Stubbs, managing editor of; Bill Hardekopf, founder of; and Tim Chen, founder of

As a general rule, look for cards that pay greater than 2 percent back, which makes them better than a standard, general-purpose rewards credit card, Chen said.What some rewards cards offer


If you shop at Target often, especially if you buy food and clothing there, it could be worth getting its store-only “REDcard.”

You’ll get a straight 5 percent off on all purchases, including at the pharmacy. Target’s debit card reaps the same benefits, but it can’t be used at the retailer’s Web site.


The home-improvement store’s Lowe’s Consumer Credit Card also gives back a generous 5 percent. It has no fee, but its interest rate is very high, at 24.99 percent for new accounts. It is also a Lowe’s-only card.


Hardekopf said store cards often aren’t a good deal compared with the best traditional credit cards, but the Gap Visa card has some appealing features. It gives you a 10 percent discount on Tuesdays; five points for every $1 spent on company brands at Gap, Banana Republic, Old Navy, Piperlime and Athleta; one point for every dollar spent elsewhere; a $10 reward card for every 1,000 points accumulated; and it sends exclusive offers to cardholders.

Best Buy

The Reward Zone MasterCard gives back 4 percent on Best Buy purchases, 2 percent on dining and groceries and 1 percent on everything else. Cardholders who take advantage of Best Buy’s deferred interest deals should watch out for retroactive interest, Chen said. The annual fee depends on creditworthiness, and it ranges from nothing to $59.


The department store’s American Express card provides 2 percent back at Dillard’s and for groceries and gas. It offers 1 percent on all other purchases. Get a 10 percent off all-day shopping pass every time you earn 1,500 points. Additional benefits for elite cardholders include free standard shipping from and free gift-wrap services.


With this Visa card, you get back 5 percent at all BP locations. You get 2 percent on travel and dining, excluding fast food, and 1 percent elsewhere. Rebates are doubled for the first 60 days of owning the card. However, you’re limited to $25 per month in rewards on purchases earning a 5 percent rebate. So, you might use it mostly for gas purchases.

This online-only department store’s Visa card gives 3 percent back on purchases, 2 percent at gas stations, restaurants and drugstores and 1 percent on everything else.

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