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What Is Store Credit?

Last modified: Sep 29, 2022

Have you ever been to a store and found yourself short on cash? 

Maybe you needed to buy a birthday present for your friend or pick up groceries, but you didn't have enough money on hand. Or you couldn't withdraw money from your credit card because you forgot your pin code. If this has happened to you, then you may have used store credit.

But what is store credit, and how does it work? Keep reading to learn more about this handy form of payment.

What Is Store Credit?

Store credit is the amount retail owners provide their customers after purchasing or returning items. This type of payment typically comes in the form of a gift card or coupon, and it can be used for any purchase at the store where it was issued.

Types of Store Credit

Store credit is a type of payment that retailers offer as an incentive to encourage customers to shop at their stores. There are a few types of store credit, including the following:

  1. Store Credit Cards: These types of cards can be used just like regular credit cards, but they usually have lower credit limits and higher interest rates.

  1. Returns and exchanges: Many stores offer customers the option to return or exchange items they are not satisfied with, even if they have used them. In most cases, store credit will be given for the returned or exchanged item in place of a cash refund.

  1. Gift cards: Many retailers offer gift cards that allow customers to purchase goods and services at their stores. Gift cards often have an expiration date that must be adhered to in order to ensure that the funds are not lost.

  1. Loyalty rewards: Some retailers offer loyalty rewards to customers who shop at their stores frequently. They are typically issued in the form of store discounts, coupons, or points.

As you can see, it's a very attractive way to shop at your favorite stores. So, you should take advantage of the different types of store credit that retailers offer to save money and buy the things you want.

Advantages of Store Credit

There are some significant advantages of store credit, whether you are a consumer who receives it as an incentive or gift or a business owner who offers it to customers

One advantage is that store credit can be used at any participating retailer, which gives consumers the flexibility to choose where they shop based on convenience and what items they need. This option allows shoppers to avoid making multiple stops to purchase various items, so they save time and money through this option.

Another benefit of store credit is that many issuers offer incentives with their cards, including cashback rewards and discounts on merchandise purchases. This can give consumers additional savings while they shop and further reduce the cost of their purchases over time.

In addition, if a customer has leftover credits from past purchases, they can use them towards future shopping trips without worrying about the value expiring. This ensures that consumers can use their store credit when it is most convenient for them and helps businesses build customer loyalty by providing a hassle-free experience.

Finally, a store credit can help businesses manage their inventory levels since customers are more likely to purchase items when they have credits available. This allows businesses to better forecast demand and ensures that they have the right mix of products in stock at all times.

Store Credit Cards 

Store credit cards are different from regular credit cards in several key ways. First, they usually come with higher interest rates and lower credit limits. 

Read more: How Old Do You Have to Be to Open a Bank Account?

Second, store credit cards are typically issued by retail stores rather than banks or other financial institutions. You can often access special perks and benefits for loyal customers when you use your store-branded card regularly at that retailer's location.

Third, many store credit cards offer rewards points or cashback on purchases made with the card. These rewards can be significant, making it well worth using the card for your regular shopping trips.

Finally, store credit cards can help you build your credit history if you use them responsibly. Making on-time payments and keeping your balances low will help improve your credit score over time, which can open up other financial opportunities down the road.

Overall, store credit cards offer a number of advantages over other types of credit cards. If used wisely, they can be a great tool for saving money and building your credit history. Just be sure to read the terms and conditions carefully before you apply so that you understand all the potential benefits and risks involved.

Types of Store Credit Cards

There are two main types of store credit cards: private-label cards and co-branded cards.

Private-label cards are issued by retailers, and they can only be used at that particular retailer.

Co-branded cards are issued by retailers in collaboration with a bank or credit card issuer. They bear the logos of both the retailer and the credit card company, but they can be used anywhere the cards from the network are accepted. 

The easiest store credit card to get is a co-branded credit card. These are cards offered by major credit card issuers like Visa and MasterCard. Co-branded cards usually don’t require a high credit score for approval, and they often come with enticing rewards, such as cashback or points that can be redeemed for store merchandise or gift cards.

Best Store Credit Cards

There are many store credit cards available, and it can be difficult to choose the best one for your needs. Here are a few of the best store credit cards:

  • The Target REDcard: This card offers 5% off every purchase made at Target and free two-day shipping on hundreds of thousands of items. There is no annual fee.
  • The Amazon Prime Store Card: This card offers 5% back on purchases made at Amazon and free two-day shipping for Prime members. There is no annual fee, but in order to get the benefits of Prime, you’ll need to have an eligible Amazon Prime membership, which costs $119 a year.
  • Costco Anywhere Visa® Card by Citi: This card offers 4% back on eligible gas purchases (up to $7,000 per year), 3% back on restaurants and travel, and 2% back on all other purchases. There is no annual fee.

As you can see, there are many great store credit cards available. Choosing one really depends on your shopping habits and preferences.

How Does Your Store Card Affect Your Credit Score?

Like most people, you probably have at least one store credit card. While these cards can be convenient and offer some great rewards, you may be wondering how they affect your credit score.

It depends. When calculating your score, store cards are generally classified as "retail tradelines," which means they're not weighted as heavily as other types of credit. However, if you carry a balance on your store card or make late payments, this can negatively impact your score.

Read more: How to Stop Living from Paycheck to Paycheck

Generally speaking, having a store card will not help or hurt your credit score too much. However, if used responsibly, a store card can actually help build your credit history and improve your score over time.

Applying and Approval for Store Credit Cards 

The first step is to fill out an application. This can usually be done online or in the store. Once you've submitted your application, it will go through a review process. During this time, the issuer will check your credit history and score to see if you're eligible for the card. If you're approved, you'll receive your new credit card in the mail within a few weeks.

Now that you have your store credit card, you can start using it right away! When making a purchase, simply present your card at checkout, and the amount will be charged to your account. Store credit cards typically have high-interest rates, so it's important to pay your balance on time to avoid costly finance charges.

With a store credit card in hand, you can take advantage of exclusive perks and discounts at your favorite retailers. Use your card wisely and stay within your budget to keep your finances healthy.

Bottom Line

So, what is store credit? In a nutshell, it’s the amount that retail owners provide their customers after making a purchase or returning items. It’s a great way to encourage customers to make more purchases and strengthen customer relationships. Store credit can help build your credit score so you can qualify for bigger purchases in the future.

Ready to start shopping? Check out our list of the best store credit cards to find one that fits your needs.


How Does Your Store Card Affect Your Credit Score?

Using your store card to make regular purchases and then paying off the balance in full each month will help your credit score. It shows that you're responsible with credit and can handle debt responsibly.

However, using your store card to make purchases and only paying the minimum amount due each month will hurt your credit score. It shows that you're not good at managing debt, which is a red flag for lenders.

So, if you want to use your store card to improve your credit score, make sure you're paying off the balance in full each month.

What Are the Benefits of Store Credit Cards?

Store credit cards usually offer a discount on your first purchase. This could be a percentage of your total purchase or a set amount of money off your purchase. 

Some store credit cards also offer rewards for spending money at the store. These rewards can come in the form of cashback, points that can be redeemed for merchandise or gift cards, or reduced interest rates on purchases.

In addition, many store credit cards offer special financing terms on large purchases. This means you can spread out your payments over a period of time without accruing interest charges. Be sure to read the terms and conditions carefully.

What Store Credit Cards Are Easy to Get With Bad Credit?

A few store credit cards are easy to get with bad credit. One of the most popular ones is The Target REDcard.

Store credit cards typically have lower limits and higher interest rates than regular credit cards, but they can be a helpful way to build up your credit score if you use them responsibly.

What Is a Store Credit Example?

A store credit example is when a store gives you a credit to use at a later time instead of giving you cash back. For example, if you return an item to a store and there’s nothing you can exchange it for, they may give you store credit instead of a refund.

Policy Advice is a website devoted to helping everyday people make, save, and grow money. While our team is comprised of personal finance pros with various areas of expertise, nothing can replace professional financial, tax, or legal advice.

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