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Do Store Credit Cards Build Credit? — Your Questions Answered

Store credit cards can potentially build credit, but they could harm it as well. It’s important to understand how they work before opening one.

Chris Scott

Contributing Writer at Tally

February 24, 2022

The last time you went shopping, you may have had a store associate tell you about a new credit card offer during checkout. Often, these offers may contain language like, “Open a new credit card today and receive 10% off your current purchase.” At the time, it may seem enticing, especially if you’re making a large purchase. 

However, before you accept one of these offers, stop to think about the impact that a store credit card will have on your credit score.

Do store credit cards build credit? We’ll answer that question and more so that you can be better prepared the next time you’re offered one. 

What is a store credit card? 

A store credit card is a type of credit card offered specifically by a retailer. Generally speaking, there are two types of store credit cards: 

  • Closed-loop cards

  • Open-loop cards 

You can only use a closed-loop card at a specific retailer or chain of retailers. For instance, let’s say that you open a TJX Rewards Credit Card. You can use this card anywhere in the TJX family, which includes department stores such as: 

  • T.J. Maxx 

  • Marshalls

  • HomeGoods

  • HomeSense

  • Sierra 

However, you can’t use the card at any other department or retail store. 

Unlike the TJX Rewards card, some closed-loop store cards may limit you to only one or two places where you can use the card. 

An open-loop retail card is sponsored by a major credit card company, like Visa, Mastercard, Discover or American Express. An example of this type would be the Capital One Walmart Rewards Card, which is a Mastercard. If you are a cardholder, you can use it anywhere Mastercard is accepted. You are not limited to a specific set of stores like you are with the closed-loop card. 

Store credit cards can be tempting because of the perks they offer. For instance, you may be able to build cash back that you can redeem on future store purchases, or you may receive special financing or deferred interest. 

The bottom line is that before you open a new credit card, you need to understand how the store credit card works, especially when compared to traditional credit cards, and how it will impact your personal finances. Let’s take a closer look. 

Are store credit cards the same as regular credit cards?

Generally speaking, store credit cards are very similar to regular credit cards. Conceptually, they work the same way. The card comes with a credit limit, which is the maximum amount you’re allowed to spend on the card. 

You will receive a statement at the end of your billing cycle, which contains your balance and the amount you owe your lender. If you do not pay back the balance in full by the due date, you are charged interest on the outstanding balance. 

Having said that, there are a couple of key differences between store credit cards and regular credit cards that are worth mentioning: 

  • You can only use store cards at specific locations: As mentioned in the previous section, you may be limited to where you can use your card. Depending on the card, you may only be allowed to use the card at one specific store. 

  • Store cards tend to have higher interest rates: Store cards tend to come with very high interest rates. If you don’t make on-time payments in full, your balance can grow quickly because of higher compounding interest charges. 

  • Store cards tend to have lower credit limits: Low credit limits prevent how much you can spend on the card. You may end up using a higher percentage of your credit limit, which can increase your credit utilization rate

  • It may be easier to be approved for a store credit card: You may find it easier to be approved for a store credit card than a traditional credit card. Some card issuers will approve you on the spot without even checking your credit score. However, opening too many credit cards in a short period of time can damage your credit score. 

Now that you have a better understanding of how store credit cards work, let’s take a look at how they can impact your credit history. 

Do store credit cards report to credit bureaus? 

Whether your credit card issuer reports to the three major credit bureaus is ultimately dependent on the lender. Some lenders will report to all three credit bureaus, while others will only report to one. 

Having said that, there’s a strong chance that your store credit card history will be reported to the credit bureaus. This means that information like your payment history and available credit will make its way onto your credit report.


Do store credit cards build credit? 

Store credit cards can potentially help you build a good credit score, but it very much depends on how you use and manage them. As is the case with any other credit account, if you make late payments, your credit score is going to suffer. If you pay off your balance in full by the due date each month, your credit score will likely improve. 

Having said that, there are a few things you need to be mindful of. The first is that there is a temptation to open store credit cards because they are so accessible. However, every time you apply for new credit, your credit score may take a hit. 

Even if the card issuer does not perform a hard inquiry during the application, you may end up lowering your credit score if you have too many new accounts in a short period of time. This is due to the “new credit” factor.

Additionally, you need to consider your credit utilization rate. Your credit utilization rate is a measure of the amount of credit you’re using compared to your total available credit. It’s recommended tokeep your overall credit utilization rate below 30%. If you have a limited credit limit, you can drive your credit utilization rate up quite easily. 

For instance, if you carry a $1,000 balance and your credit limit is $10,000, you’re only using 10% of your credit, which is seen as a good thing. But if your credit limit is only $1,000, the credit bureaus see that you are using 100% of your credit, which will harm your credit score. Because store credit cards often have lower credit limits, you may need to be particularly mindful of your credit utilization rate. 

Lastly, you also need to make sure that you’re using your card. If you do not use your card, your lender could end up closing it. Closing a card could also do harm to your credit score, as it may lower your length of credit history. And because you are limited to where you can use the card, you may find yourself spending unnecessarily just to keep the card active. 

Should you use a store credit card? 

The best store credit cards may be tempting, but be sure to do your homework before opening one.

If you need to open a credit card to build credit, you may want to consider a secured credit card instead. These cards require a security deposit but can help you build credit without the strings that often come with store credit cards. 

Perhaps the most important thing to remember is that credit cards are to be used responsibly. Instead of opening credit cards to finance large purchases, try to budget for these purchases and use cash when possible. 

Practice fiscal responsibility when using store credit cards 

The next time you’re given an exclusive credit card offer while shopping, you’d be wise to stop and think, “Do store credit cards build credit?” Ultimately, the answer is yes, but only if you use them responsibly. 

Your credit score may take an initial hit when you open the card, and you’ll need to manage your credit utilization rate since you could quickly spend your credit limit. 

No matter which type of credit card you open, it’s important that you understand how it will impact you. If you accumulate debt on the card, it can be difficult to pay off. 

In these cases, you may want to consider a credit card payoff app like Tally†. Tally can help you manage due dates and pay down debt efficiently by offering a lower-interest line of credit, freeing up cash and allowing you to focus on other financial goals.

To get the benefits of a Tally line of credit, you must qualify for and accept a Tally line of credit. The APR (which is the same as your interest rate) will be between 7.90% and 29.99% per year and will be based on your credit history. The APR will vary with the market based on the Prime Rate. Annual fees range from $0 - $300.