Whether you do most of your retail shopping in a department store, sporting goods store, or even a big box electronics store, you’ve probably been offered a retail-branded credit card at some point. Often incentivized with shopping discounts, these store credit cards usually seem worth the application. So, what do the best retail credit cards have to offer, and is it better than using the rewards credit card you already carry?

What to Consider

When you open a store credit card, you are often signing up for a limited credit product. Unless that card is co-branded (such as the Amazon Rewards Visa Signature Card through Chase), you will only be able to use it when shopping with the retailer in question.

Yes, this makes a retail card less convenient than an everyday rewards card. However, these store-specific products often bring with them a number of benefits, which frequent shoppers will find to be enticing.

For instance, you may receive cash back or a percentage discount on every purchase made at the store in question (and even certain retail partners). In some cases, this perk is offered at a higher rate than you’d get with your non-branded cash back rewards credit card.

Many stores also offer benefits like free shipping or extended return policies. If you purchase an item with a store’s credit card and need to return it past the stated time period – or simply can’t find your receipt – you’re often granted some extra wiggle room. This might be in the form of receipt-free returns or even an extra 30-90 days to return your item, no questions asked.

Another great benefit is that most store-branded credit credit cards (especially closed-loop ones, that can’t be used anywhere other than the store) are offered without an annual fee. When they are earning rewards that are comparable to some of the most enviable cash back credit cards on the market, they aren’t usually subject to the fees charged for using them.

Common Retail Credit Cards

There are two types of retail credit cards out there: open loop and closed loop.

Open loop cards are co-branded with one of the major issuers (Visa, Mastercard, etc.). This means that you can use them anywhere… not just the store in question. While you’ll earn better benefits by using the card in-store, you have the ability to also earn rewards on your everyday spending, too.

Take the Costco Anywhere Visa® Card by Citi. This open loop card can be used at Costco, of course, but also anywhere else you shop. If you use it on Costco purchases, you’ll get 2% cash back. For gas (even at Costco pumps), you’ll earn an impressive, industry-leading 4% (up to $7,000 in annual fuel spending). Restaurants and travel will snag another 3% and you’ll also get 1% back on everything else you buy.

This is a great card to get if you spend a fair amount on gas each year and also shop at Costco. The rewards earned are limited to use at Costco, but if you’re no stranger to stocking up at the membership store on the weekends, this won’t be an issue.

The other type of retail credit card is of the closed loop variety. These cards can only be used at the store in question, and cannot be used for spending elsewhere. However, the benefits when you do shop at the branded store are usually pretty good.

Take the Target REDcard™ for instance. You can use this store credit card to charge purchases at Target or Target.com. When you use your card in-store or online, you’ll save 5% on your purchase each and every day. In addition, you’ll receive free shipping on most items, as well as an extra 30 days for returns both in-store and online.

If home improvement is your thing, the Lowe’s Advantage Card is another closed loop product that’s worth a look. You’ll receive an unlimited 5% off all Lowe’s purchases, every single day. If you’d rather forgo the 5% off, you can also take advantage of promotional financing on your bigger items. When you make a purchase over $299, you can opt for 0% interest if paid in full within six months.

Here are a few other retail credit cards that are fairly popular and offer a number of rewards:

Amazon Rewards Signature Visa – This card is co-branded with Chase, and offers perks for spending both at the online giant and everywhere else. When you spend on Amazon.com or at Whole Foods, you’ll get 5% back on every purchase. Then, you’ll earn 2% back on gas, restaurant, and drug store purchases, with 1% earned everywhere else. Rewards can be redeemed toward future Amazon purchases, without any minimum reward accrual required (if you’ve earned $3, you can apply $3).

This card comes with a number of travel insurance, like luggage protection, rental car coverage, and delayed trip coverage. You’ll also get a $50 credit when you’re approved for the card, and there is no annual fee.

GAP Visa – This open loop card is co-branded with Synchrony Bank, allowing you to use it at GAP, GAP’s sister stores (Banana Republic, Old Navy, Athleta, and Piperlime), or anywhere else that accepts Visa. Rewards are earned everywhere: 5 points for every dollar spent at GAP/affiliated stores and 1 point per dollar spent elsewhere. Points can be redeemed as rewards toward GAP-affiliated purchases, with each point converting to a $0.01 reward. There is no annual fee for this card.

Nordstrom Visa Signature – This co-branded card allows you to earn points (2x) on every Nordstrom, Nordstrom Rack, HauteLook, or Trunk Club purchase, and 1 point on each dollar spent everywhere else. While this is a fairly low rewards rate (compared to other cash back credit cards), you do get a $40 Note (bonus) if you use the card to make a purchase the same day you’re approved. Points are redeemed in the form of Notes, which are used to make purchases from Nordstrom. There is no annual fee for this card.

How Retail Cards Compare

As you can see, the perks with getting a retail credit card can vary. Whether a store card makes more sense to you than an everyday rewards card depends on your own spending habits.

While you are often able to earn more in rewards at the store in question – when spending on a retail card – you aren’t likely to earn nearly as much everywhere else. You’re also more limited in your redemption options, typically forced to use rewards toward future purchases at that store (and its affiliate companies).

However, the benefits may be well worthwhile. As we mentioned with the Lowe’s Advantage Card, you can take advantage of 0% interest for 6 months if you make purchases over $299. This can come in real handy if you are regularly tackling projects around the house.

It’s important to note one of the key downsides to retail credit cards, though: the interest rate. While the average interest rate for general purpose credit cards is about 16.15%, this jumps considerably to 24.99% for retail credit cards. Many of them even teeter just below 30%, making these very unwise products to use if you plan to hold a balance on the card.

Choosing a Retail Credit Card

If you’re being lured in by the clerk’s promise of 20% off at the register, or a tempting “$50 off your purchase” note at the online check out, no fear. While retail credit cards have their downsides, they can also be beneficial financial products.

If you are loyal to a particular brand and spend enough money to warrant a store-branded credit card, go for it. Just first make sure that you can’t earn more in rewards with a more flexible, everyday cash back card.

You may want to consider a co-branded card, which gives you perks at the store of choice in addition to the flexibility of charging purchases to the card elsewhere. Your rewards may still be limited, but at least you can still earn with everything you buy.