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By Barry Choi
Special to the Financial Independence Hub
Even as another holiday season has arrived and nearly gone, retailers are trying their best to get us to spend money at their stores. One way they hope to achieve this is by offering enticing rewards and promotions when you sign up for their store credit card. This is a great strategy for retailers, but it’s also potentially a good deal for you since store credit cards can help you pocket additional savings.
Since many people already have a credit card, does it make sense to sign up for a new store credit card? Like any other credit card, it really comes down to the pros and cons of the card and how it fits into your spending.
The pros of store credit cards
Instant welcome offers
Although the welcome offers that come with store credit cards aren’t as generous as some other cards out there, sometimes they’re worth paying attention to. For example, the Hudson’s Bay credit card gives you 10% off your first purchase. If you’re buying a big-ticket item, then it might be worth your while to sign up: especially if you shop from Hudson’s Bay on the regular card.
Unlike most credit cards, the savings offered by store credit-card promotions are also instant. You won’t have to wait several statement periods or spend a certain amount (i.e. $3,000 within three months) to access the offer.
- Great rewards for shopping in their stores
What’s really attractive about store credit cards is their enhanced in-store rewards. This, of course, is only relevant if you happen to shop at the retailer on a regular basis.
For example, with the Triangle Mastercard, you’ll earn 4% in Canadian Tire Money per dollar spent at Canadian Tire stores. There’s no other credit card out there that can beat that return at Canadian Tire, so if the iconic retailer is a regular part of your shopping routine, you could stand to save big with this store credit card.
PC Optimum is another popular retail loyalty program in Canada. If you were to apply for a PC Financial Mastercard, you could earn up to 30 PC Optimum points per dollar spent at Loblaws-owned grocery stores and up to 45 points per dollar at Shoppers Drug Mart: a 3% and 4.5% return respectively. Those earn rates add up to considerable savings on your grocery and pharmacy bills, even compared to what non-retail credit cards offer.
- Store credit cards are often easier to get
What’s also appealing about store credit cards is that they often have low income requirements and there’s usually no annual fee: so they’re easy to get and free to carry. The reason retailers do this is so you’ll be more inclined to apply. For example, the Costco credit card from Capital One has no annual fee and the application doesn’t list a minimum income requirement.
- Store credit cards often let you take advantage of unique financing options
Sometimes store credit cards offer special in-store benefits that can’t be ignored, such as Canadian Tire’s credit cards, which offer no interest financing up to 24 months that applies to qualifying purchases of $200 or more at participating stores.
Let’s say an emergency has come up and you’ve had to spend $600 at Canadian Tire. By taking advantage of the no-fee, no-interest financing, you’d only have to pay $25 a month for 24 months with no additional interest or fees. This is handy if you don’t have the funds available to pay off the purchase right away.
It’s obviously better to pay off your bills in full as soon as your monthly statement arrives, but there’s no denying that this is a great way to help manage your cash flow.
The cons of store credit cards
- Points redemption are limited
With any store credit card, the rewards you earn can usually only be redeemed for free merchandise or discounts within their own network of retailers. For example, the Canadian Tire Money you earn on a Triangle Mastercard can only be redeemed at select locations like Canadian Tire and Sports Chek.
This is fine if you do a lot of shopping at those stores, but it’s obviously not as flexible as a full-fledged cash back or travel points credit card.
- Low earn rate at other retailers
Since store credit cards are designed to keep you in their stores, they typically offer limited points on any purchases made outside of their network. Taking a look at the PC Financial Mastercards again: You can earn up to 3% per dollar on your grocery shopping at Loblaws banner stores, however, if you shop outside of their network at another grocery chain, you’d only earn 1%. In comparison to a typical rewards credit cards, like the TD Cash Back Visa Infinite, you’ll earn the same great rewards on groceries (3% cash back) regardless of whether you do your grocery shopping at Loblaws, Sobeys, Metro, or Food Basics.
- Limited additional benefits
What also works against store credit cards is the lack of additional benefits. It’s highly unlikely that you’ll get benefits such as travel medical insurance, trip cancellation insurance, mobile device insurance, airport lounge access or travel credits. That said, some of the higher end retail credit cards do offer some very basic travel medical and rental car insurance. If having additional perks is important to you, then relying on a single store credit card is not the best idea.
- You may not get a chance to read the terms and conditions
Finally, one thing that you need to be aware of when you sign up for any credit card are the terms and conditions. With store credit cards, often you’ll be pressured by an in-store sales rep to sign up for a credit card to take advantage of the benefits. The thing is, there are probably quite a few things they haven’t told you about such as the interest rate or any additional fees. There’s also the possibility that the rep has their information wrong. Unless you have access to the terms and conditions on the spot, you may want to wait until you go home so you can do your research before applying.
Final thoughts
There’s no denying that store credit cards can be useful to people who spend a lot at certain retailers, but at the same time, it may not make sense for it to be your only credit card. Take a look at the rewards you earn, additional benefits and if there’s an annual fee before deciding if you should apply.
Barry Choi is a personal finance and travel expert at Moneywehave.com and often writes for Ratehub.ca’s blog, The Bottom Line.
