Article by Tom Blandford - 10th July 2018

The Advantages And Disadvantages Of Store Cards

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.

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