How to establish credit using a retail credit card

You know the scenario — you’re checking out with your order at a large department store or on an online store and right before you go to pay, you’re prompted with,“Do you have one of our store credit cards? If you sign up for one, today, I can give you 25% off on your order, and you will save BIG.” 

You look at your final order price and 25% off sounds really good, so you say, “What the heck?” and sign up. 

What is not mentioned is that the APR for the cards could be as high as 23.23%, says a 2014 survey

The Upside of a Store Credit Card

The good thing about store credit cards is that they rarely require a user to qualify for them, which makes them a good last resort for establishing credit for the first time. 

Unfortunately and oddly enough, you need credit to build credit and there are not too many options for establishing credit history for the first time. You can:

  • Apply for a secured credit card

  • Find a co-signer

  • Apply for a credit builder loan from your local credit union or Self Lender credit builder account

  • Use a retail credit card

Many people use retail credit cards to establish credit for the first time. Lindsay Engle an entrepreneur and founder of Eternally Beautiful Women, a skincare line, says she uses three store cards and got them very early on. “They were among my very first credit cards. Store credit cards are an excellent way of starting to build great credit,” says Engle. 

However, you should be wary of retail credit cards. If you’re going to use one to establish credit then the card must abide by the following two rules. 

Rule #1: The Card has Auto Pay

Most retail credit cards have an auto pay feature that allows user to set up reoccurring payments, so that they are never late on a payment. However, some retail credit cards do not have an auto pay feature. Your retail store credit card must have an auto pay feature on it for you to consider using it. 

In addition, to making sure you’re never late on retail credit card payments, the auto pay feature serves to make sure you’re never charged those high-interest fees that are always written in fine print, 

Stephanie Heacox, founder and CEO of Sharegenarians, an online housemate service specifically for older adults, says that she will only use a store credit card if she can set up auto-pay, “so that I will never get charged interest.” She specifically refers to the interest on store credit cards as horrendous

So before you go rushing off to get a store credit card from one of your favorite places, make sure that it has auto pay. 

Rule #2: It’s Not Accepted Everywhere

The second rule that is a must when considering a retail credit card is to make sure that it’s not accepted everywhere. 

Yep, you read that correctly. 

The biggest problem with credit cards is people going into debt over them, because they use them on everything from birthday cakes to gas to lottery tickets.

As a first time credit card user who is using a retail credit card to establish credit for the first time, it’s important that you have boundaries. 

Engle says she likes retail credit cards because the cards she has could only be used at their designated store. “That way I can’t over use them. Regular cards I tend to abuse far more than store brand credit cards,” she said. 

Remember, retail credit cards should only be used by specific people for specific purposes, and at Self Lender we believe that the lack of transparency is one of the biggest problems in consumer finance

Don't Get One for the Wrong Reasons

At the beginning of this article, there was an example of a hypothetical shopper looking at their order and thinking about how 25% off sounded much better than the normal price. If you're doing it for just the savings, then you're doing it for the wrong reason.

Pat Huegel, CEO of KNTY Design, a bracelet line, doesn’t understand why someone would sign up for a store credit card. “Saving $5 in exchange for opening a whole new line of credit” says Huegel on why it's not worth it to him.

Arianna of Pointchaser, a travel rewards guide website, agrees with Huegel that they can be useless if you're using it for the wrong reasons. “Aside from an initially decent discount (i.e. upwards of 20% at Macys), they’re pretty useless and not very rewarding. Many of these cards carry high-interest fees and offer low credit limits, which isn’t ideal if you want to increase your credit score,” says Arianna. She believes that Travel Rewards card are much more beneficial. 

If you are working to establishing your credit history for the first time then you can use a retail store credit card. We recommend using it to solely establish. Once you can qualify for a secured or unsecured credit card, we recommend that you only use it every once in a while to keep the card from lying dormant. Unused credit lines can lower your credit score. 

A store credit card can be a risky way to build credit, but if you follow our rules and are aware of the risk, then you will not have any problems.

Written on September 30, 2016

Self Lender is a venture-backed startup that helps people build credit and savings. Comments? Questions? Send us a note at

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