The Advantages & Disadvantages of Store Cards

Posted by Tom Blandford in Personal Finance on 10 July 2018 - Tom is a Credit Analyst at checkmyfile

There are a number of reasons you might take out a store card: whether you’re just waiting in-line at the shop and find out you can save on today’s shopping or they offer the promise of making money in the future, these cards regularly find their way into wallets (or phones via an app).

Most big retailers offer their own cards, which allow you to take your purchases home – often with a nice discount applied – without having to pay a penny at the till.

But as tempting it can be to take one out on the spot, it’s important to make sure you’re getting the best deal overall, which might take a little research and forethought.

What’s the difference between a store card and a credit card?

The main difference between a store card and a credit card is that a store card can often only be used in one chain or group whereas most credit cards are famously 'accepted everywhere' (with the occasional exception if you are an AMEX cardholder). Other than that, store cards can still be used to purchase goods without requiring the funds to be in your account at the time of payment, you may still receive some discount or benefits and you will even be charged interest, though often at a much higher rate than you would get with mainstream credit cards.

Store card accounts also have a credit limit that can go up or down, in the same way a credit card can.

The way store card accounts are managed will also be reported to the UK’s Credit Reference Agencies in the same manner that credit card accounts are, and so can help or hinder your Credit Rating, depending on how well you maintain payments and stay well within your limit.

If you’re taking out a store card to build your credit history however, there are plenty of alternatives that might be better suited to this goal, even if you don’t use a Credit Card.


Although applying for store cards will also involve a credit check, they are often easier to get accepted for than a credit card. That’s mainly due to them typically having smaller credit limits and higher APRs – both of which give retailers (or rather the finance company that issues the card) extra protection against ‘bad debt’ and makes them more willing to take on customers.

Building credit

The benefit or harm that a card can do to your Credit Report is pretty much indistinguishable from a credit card – pay the due amount on time each month and you’ll look good, but pay late and there’s a good chance that it’ll count against you when it comes to applying for more ‘serious’ types of credit such as a loan or mortgage.

What’s the difference between store loyalty cards, store cards and store-branded Credit Cards?

Some stores, including Tesco, M&S, Sainsbury’s and ASDA offer their own-branded Credit Cards that often double up as loyalty cards. These cards function just like any credit card that you can get from a bank but often give their customers the ability to save money or earn rewards when spending at that specific retailer.

Most retailers don’t actually provide the finance element of their own store card. Instead, this is provided by a finance house – for example, NewDay provide financial services for retailers such as Topshop and Miss Selfridge. It is this finance house that will manage the account, report activity to Credit Reference Agencies, and in the event that you don’t pay, take appropriate action.

Loyalty cards – such as Nectar, Clubcard and M&S ‘Sparks’ only offer the ‘rewards’ element, rather than any credit facility and so won’t appear on your Credit Report.

It’s not just shops that offer branded credit cards either. Disney have recently started offering a rewards card in the US that provides exclusive bonuses for cardholders to redeem at Disney parks. This includes meet-and-greets with various Disney characters, discounts on Disney merchandise at parks or online, and money off dining at Disney parks, all of which would be great if not for the fact you need to be 18 or older to apply. But speaking as someone old enough to take out finance and regularly frequents the happiest place on Earth, the savings can be significant.

One downside to cards like this is that the reward rates are not always that great when compared to a credit card available from a mainstream lender. The Disney Premier VISA card comes with a 2% reward rate whereas many lenders such as Citi provide credit cards with reward rates of 1.5-2% with no annual fee. As the Disney Premier VISA comes with an annual fee of $49, you would need to spend at least $2,450 (Currently around the equivalent of £1,800) each year before you start to benefit from the cashback rewards.

Store cards may well come with a tempting introductory offer such as an immediate discount on your purchases, but as an impulse application, are unlikely to be the best option available to you. For long term benefits and flexibility, simply plan ahead, get a credit card that matches your typical spending habits and chances are you’ll end up better off in the long run.

Before applying for any sort of finance, it’s important to make sure that your Credit Report is in order so that you understand what information will be used to assess your application. If you haven’t already, you can try checkmyfile FREE for 30 days, then for just £14.99 a month afterwards, which you can cancel at any time.

How interest rates are calculated

If you’ve ever applied for a form of credit, you may well have discovered to your cost that the advertised APR and the interest rate you’re offered if you are accepted can be very different things.

Published on 14 Jun 2019 by Richard Catlin

Full Article

The Importance of Proving Stability to Lenders

In addition to the key roles that your Credit History and Affordability play in determining whether or not you will be accepted for credit, we regularly talk about the importance of being able to demonstrate your ‘stability’ to potential lenders.

Published on 15 Mar 2019 by Sophie Regester

Full Article

If I Change My Name Can I Still Get Credit?

Legally changing your name is an increasingly popular thing to do in the UK: while getting married or divorced still makes up a large proportion of this, there is a growing trend towards people changing their name following civil partnerships, a change in gender, living in blended families, or simply because they’re seeking a change – the list is long.

Published on 22 Feb 2019 by Tom Magor

Full Article

Which Credit Report Information Can Landlords See

These days whenever you rent a property you may be required to pass checks set by the landlord or letting agent to prove that you will be a good tenant and that you’ll be able to reliably make rent payments to the property on time.

Published on 7 Feb 2019 by Kevin Pearce

Full Article

What Credit Checks Look For When You Switch Energy

As we get deeper into Winter, it’s inevitable that millions of consumers across the UK will end up using more energy and spending more on bills due to the colder weather and long stretches of darkness.

Published on 9 Jan 2019 by Jamie Mackenzie Smith

Full Article

Pros and cons of going paperless

Whether you are environmentally motivated or simply to get a discount for moving your billing online, you might find it makes sense to abandon paper for your business, if you haven’t already.

Published on 7 Dec 2018 by Kevin Pearce

Full Article

How To Get The Best Car Finance Deals

New car sales may have slowed in recent years, with the economy, emissions scandals and Millennials all being cited as the root cause at one point or another. But the number of people choosing to use credit as a means of driving away in a new car continues to rise, according to figures from the Finance & Leasing Association which shows that the new car finance market grew by 15% in July 2018 when compared to the previous year.

Published on 8 Oct 2018 by Kiah Phillips

Full Article

We're Now More Likely To Be Borrowers Than Savers

UK Households are now more likely to be borrowers than savers, with savings at their lowest since 1963, according to a study by the Office for National Statistics. Households are increasingly borrowing more – by taking out loans, car finance, and mortgages – than they are collectively depositing into savings accounts.

Published on 5 Oct 2018 by Sam Griffin

Full Article

The Credit Crunch 10 Years On: What’s Changed?

For many people, especially the those lucky enough to not have been old enough to be directly affected, the economic downturn of 2007-2009 seems like a distant memory. The first iPhone had launched a mere two months before the recession hit, and since then they’ve rebooted the Spiderman film franchise not once, but twice. But more importantly, has enough time passed for the borrowing/lending market to revert to its old tricks?

Published on 26 Sep 2018 by Jamie Mackenzie Smith

Full Article

The Limitation Act 1980 and Debt Time limits

The majority of credit consumers believe that once a debt has been acquired, that debt will remain until the full balance has been cleared regardless of the length of time passed. This may not be the case though, thanks to a little-known piece of legislation known as the Limitation Act 1980.

Published on 19 Sep 2018 by Erika Bone

Full Article


We are rated number 1 for customer service on