What is a Retail Credit Card and How Can It Impact Credit?

General purpose credit cards often come with rewards, promotional financing or introductory offers. But there's another type of credit card that offers another perk altogether, and that's the store card.

When used responsibly, this type of credit card may help improve your credit score over time.

A store card is a credit card that can only be used at one specific store, or a group of stores, like a supermarket or department store. It functions much like general-purpose credit cards, and the issuing merchant may offer loyalty rewards, perks and deals when you use the card to shop at their business either online or in-store.

The main difference between general purpose credit cards and store credit cards is where you can use them. General purpose credit cards work anywhere in the world where credit is accepted, whereas store cards are known as “closed loop" because you can only use them at certain, specified businesses.¹

"At Synchrony, we offer flexible financing and best-in-class credit card programs through our numerous partnerships with beloved brands to bring customers more choices, flexibility and convenience," said Curtis Howse, CEO of Home and Auto at Synchrony.

“It's a powerful option for shoppers who can take advantage of special offers, promotional financing and perks while shopping at their favorite retailers, while potentially enhancing their financial futures over the long term."

Store cards may have quite a few perks, such as:

• Being easier to obtain if you have a lower credit score or short credit history, offering the chance to build good credit over the long term.
• Generally having lower credit limits, which can help you keep your total credit balance lower.
• Opportunities for low-or-no annual fees, which some general purpose credit cards charge.
• Exclusive, store-specific cardholder perks, rewards, sign-on deals and promotional financing from your favorite brands and stores.

For the most part, the limitations of a store card relate to their limited use:

• You'll only use your card at the specific store or chain that issued your card.
• Your credit limits may be lower than general purpose credit cards, putting a ceiling on how much you can spend (but then again, when building a good credit score, this isn't necessarily a bad thing.)

Many of your favorite stores likely offer a store card, including many Synchrony partners. Whether you are shopping for items for the home, taking care of your family vehicle or shopping at your favorite retailer, store cards may help you access deals that meet your everyday needs. Some of our partners provide cards for things like:

• Home improvement, furnishings, décor, flooring, electronics, appliances, HVAC and lawn/garden
• Automotive maintenance, repair and everyday needs — like gas
• Health and wellness for the whole family, from vision needs to pet care
• Special interests, from music to sporting goods and art/decor

You can learn more about our partners and even apply for their cards here.

When applying for a loan (whether a traditional card, a store card, or auto or personal loans), lenders will access your credit report to assess your creditworthiness. While this may cause a temporary dip in your credit score, the establishment of a new credit tradeline well managed should have a long-term benefit in improving your credit score.

Several factors have traditionally be used when calculating a person's credit score. Like general purpose credit cards, store cards can either positively or negatively affect this score. Let's look at a few of the ways that shopping cards may be a boon to your credit.

• Build a positive credit history. When you make timely payments on your store card, you are helping to build your credit history, which is a comprehensive record of your ability to repay loans.
• Lead to credit limit increases. When you have established that you can make store card payments on time, you may qualify for an overall increase in your credit limit or other credit card offers.
• Improve credit utilization ratio. Another dimension of your credit score is how much credit you use versus the amount that you have available, known as your utilization ratio. Factors may include your total utilization rate, or your utilization rate per card, but a ratio less than 30% is usually considered ideal. If your store card helps enhance the total amount of credit you have available, it can be one way to improve your credit utilization ratio.
• Diversify your credit mix. Credit trade lines may include your mortgage, car payment or student loans, or credit cards. Creditors sometimes look at the diversity of this mix—and your track record of managing them—when determining your creditworthiness. A store card can be one avenue to demonstrate greater credit diversity.
• Increase your credit age. Lenders often look at the length of time you have responsibly managed credit over your lifetime. In general, the longer you have made timely payments on an account, the better. If you plan to make payments on a store card for the foreseeable future, it can boost your credit age.

The most important factor when considering a store card is balancing your financial situation and the payments you will be expected to make each month. If your payment amount fits your budget now and in the future, it presents an opportunity to strengthen your credit score long-term.

Before taking advantage of deals and discounts offered by your favorite store, conduct your own research to understand the pros and cons of the deal. Pay special attention to the terms and conditions of your store card, including the interest rates and fees that you could pay.

For example, store cards may charge higher interest rates than traditional cards. That means if you carry a balance, the total amount of interest owed may add up to more. However, if you shop with one retailer often and plan to pay off the balance each month, you're in a good position to take advantage of the benefits of a store card.

Like any other financial tool, a store card can be valuable when used consistently and responsibly over time. Not only can these cards come with perks, rewards and special offers to your favorite places to shop, but they can even help enhance your credit as you build a history of timely payments.