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Everything You Need to Know About Store Credit Cards

By Nicole Bustamante

Are you thinking of going all in with your favorite retailer? You’re already on the right track: you’re doing your research by reading this article, rather than making a quick decision to opt in to that enticing store credit card that the cashier’s offering you.


The temptation can be hard to resist: according to, about 62% of adults have applied to a retail credit card at some point, and 69% of that population did so on impulse when checking out. So if you’re enticed by the extra 10-25% off you’re offered to open a credit card at checkout, you’re not alone.


But it’s always best to evaluate any financial decision carefully before taking the plunge. We’ve addressed some of the most common questions about opening a private label credit card to help you weigh the pros and cons.


1. How do store credit cards work?


Credit cards offered by major retailers like Macy’s, Nordstrom, and Walmart often come with an initial discount, plus access to benefits and rewards when you shop there in the future. There are two main kinds of store credit cards: open-loop and closed-loop.


● Open-Loop

An open-loop card can be used at a number of retailers. These kinds of cards are usually partnered with a major credit network like Visa. With an open-loop card, you can earn rewards toward a specific retailer while shopping anywhere.


● Closed-Loop

A closed-loop card can be used only at that specific retail store. For example, you can only earn rewards from a Nordstrom card when you shop at Nordstrom.


2. How do store credit cards compare to using a buy now, pay later service?


While you can earn specific rewards with a retail store credit card, this can also be a dangerous system that feeds into compulsive shopping, leading you to spend more than usual. This is especially true for closed-loop cards that you can only use at one store. 


When it comes to buy now, pay later (BNPL) services like Zip, you can shop anywhere while also responsibly managing your finances. With Zip, you can shop online or in-store at any of your favorite stores, from Macy’s to a local boutique. You can even grocery shop and pay your bills with it, splitting any purchase into 4 payments over 6 weeks.


3. What does the application process look like?


Every store credit card application process may look a little bit different. Generally, you will be asked for basic information like your name, address, social security number, and yearly income. 


Closed-loop store cards can be easier to get approved for. Open-loop, co-branded store credit cards may require a higher credit score to be approved. Whether you are interested in an open- or closed-loop store credit card, you should be aware that your credit score will take a small hit when you apply. 


4. Can you use store credit cards anywhere?


Again, it depends on whether you chose an open- or closed-loop card. If you open a closed-loop Gap credit card, you can only use it at Gap stores. If you open an open-loop Gap Visa credit card, you can use it anywhere while racking up Gap store rewards. 


5. What should I look out for when opening a retail credit card?


You don’t want to sign up for a store credit card on impulse. If you’re planning on opening a card with a retailer, take the time and space to read through everything and make an educated decision. Here are a few things to be aware of when considering a store credit card.


●Terms and Conditions

Pay attention to the small print. Store credit cards can average interest rates of 20% and up—a percentage that has not shifted despite the Federal Reserve reducing federal fund rates to nearly 0% in the last year. 


● Deferred Interest

Being offered a 0% interest promotion for a specific window of time is typical when opening a credit card at a traditional bank issuer. Retail store cards may offer a similar “deferred interest” program, but there’s a catch. If you haven’t paid off the card in full by the time the deferred interest period is over, then you will have to pay interest on your current balance and on the entire original purchase. Yikes!


● Low Credit Limits

Store credit cards tend to have very low credit limits. You’ll want to be aware of the limit available before signing on the dotted line, because the amount of credit that you use plays a major role in your credit score. Credit cardholders are advised to stay below 30% of their limit on any card. It’s never a good idea to max out any credit card, especially a store-specific card that may entice you to spend more. 


● Limited Use

As we mentioned earlier, if you’re opening a closed-loop card then you can only use it at that specific retailer. Make sure that you are clear on which type of card you’re opening, and be wary: paying your bills with a private label card may not be as simple as you are used to with general credit card issuers.



6. Do store credit cards build credit?


Yes, both closed and open-loop cards allow you to build credit. Because closed-loop cards are easier to be approved for, this can be a great opportunity for anyone with a less-than-perfect credit score to build it back up, especially because these cards tend to have lower limits. 


If you use your store credit card responsibly and don’t give in to the temptation to constantly shop there, then this can be a major benefit. But because store credit cards can affect your existing credit, this can also be a bad thing. If you are spending up to the limit of the card every month and not paying it off on time, this can negatively affect your credit score. 


While a retail store credit card might seem like an amazing idea in the heat of the moment, making a big decision under pressure can often lead to buyer’s remorse. So if you decide that one of these credit cards is right for you, make sure to do so on your own time and do your due diligence to understand the fine print.


Looking for a way to increase your spending power without limiting yourself to the terms & conditions of a store credit card? Check out the better way to pay and start splitting your payments in 4 anywhere you shop with Zip.

Get started with Zip today

Zip’s editorial content is not written by a financial advisor. It’s intended for informational purposes and should not be considered legal or financial advice. Consult a professional to learn what financial products are right for you.

About the author
Nicole Bustamante

Nicole Bustamante is a writer and journalist passionate about storytelling and the art of fashion. She has written for The Zoe Report, Angeleno Magazine, Modern Luxury Interiors California, and more in addition to writing for her personal blog.