Should You Get a Department Store Card?

With the credit industry in lock-down mode, a lot of people starting out in credit are finding it difficult to do. Where once I had a few first-timer credit cards I could recommend, I’m now learning from clients that these companies are not really accepting newbie credit. It’s turning into a catch-22. You need credit in order to get credit, but how are you supposed to get credit if no one will give it to you? To that end, I’ve had to suggest department store cards.

I’m not a big fan of department store cards overall; however, when it’s the only form of credit you can get, you have to start somewhere. So, with that in mind, I figured we could look at the pros and cons for having a department store card.


  • When used responsibly, they can help build credit.

I stress the word responsibly here, but traditionally speaking, because department store cards have been a little easier to get for those just starting out, it is a good card to help establish credit. However, this shouldn’t be a long term option.

  • You can save money through card discounts.

The hook for department store cards is that most will offer you 10-20% off your first purchase if you’re approved. Now, it’s important to be careful that you don’t go overboard with this; however, if you were planning to spend the money anyway, getting a discount is always a good thing.

  • Membership benefits.

Some retailers have membership programs with their cards and if you shop there frequently, you could rack up coupons or points to use towards purchases.


  • Hard hit against your credit.

This is true of any hard inquiry into your credit, even major credit cards, but since department store cards are not usually a long-term option, dropping your score up to 30 points seems excessive, especially if you’re not planning to use the card or the department store.

  • High interest rates/short grace period.

The rates on these cards are fairly high, and for someone new to credit who hasn’t yet learned to be responsible, this can cause long-term damages. Not to mention the fact that these cards come with very little grace periods, so they are good at catching people on the interest, even if someone usually pays the card off every month. The best way to avoid problems here is watch what you spend and pay it off on time, every month. Read the terms and conditions and know what is expected of you.

  • Many are backed by finance companies.

One of the reasons these are sometimes easier to obtain is that many are backed by finance companies – the same kinds of companies that offer shark loans to people who are in desperate need of money. Seeing finance companies on a credit report is a concern for most lenders, especially when there is no indication that the finance company is backing a department store card. This is because finance companies usually indicate there is financial trouble in an individual’s life and they are in desperate need of a loan.

Most credit files now show the department store with the finance company; however, not all of them have that notation. When the department store is unidentifiable, lenders will be more cautious just because of the finance company.

The Verdict

Overall, I still don’t like department store cards because of the high interest and the fact that the promise of 10-20% off lures people into buying more when they take advantage of the offer, often getting them into trouble. That said, with economic conditions changing, I think the responsible use of these cards can effectively help establish a credit file.

What do you guys think of department store cards? Are they a good practice for someone starting out on their financial journey? What would you recommend to someone just starting out?

6 thoughts on “Should You Get a Department Store Card?”

  1. I like store cards because they give me huge credit limits which help my credit utilization percentage greatly. And I am not the least bit tempted to use them.

    I know I should use them, to keep them active, so I buy something very inexpensive every six months or a year. Did you know that if you really look, you can find a $10 t-shirt on the Neiman Marcus site? Even with Saks, there are little knickknacks and doodads to be found for under $20. It turns out I got some Valentine’s Day candy from them (don’t ask about the cost – it was not $20.) Bloomingdales offers kitchenware at reasonable prices, and you only need to buy, for example, one cookie sheet and your card is active. I did that (actually it was a set, and my stuff badly needed replacing, it was literally flaking to pieces, and $39 was reasonable for the five items I got in the set) and they bumped my credit limit from $1000 to $2500.

    $2500 here, $2500 there, and $1600 there really helps my utilization calculation a lot. I also got a jewelry store card and they bumped me from $2000 to $3000 and I have bought very little (not really into jewelry, so again, no temptation.)

  2. actually, having an open department store card raises your credit score by 10-20 pts. if it’s a hard pull, you take the initial hit on the inquiry, but that’s temporary.

  3. If the idea is just to get started – then Credit Unions are a great way to get a credit card too. Plus there is an added benefit that you will not be tempted with shopping offers in your mailbox :)

  4. I think overall it’s bad for the average person to hold onto only because the average person will use it a lot and rack up some debt.

    That being said, I think they are AWESOME to use for those who just want to grab those 20% discounts and all (like me)! As long as you pay them off in time and all, then I see no problem taking advantage of them and making them work for YOU instead of the other way around.

    Usually i’ll cancel it after i’m done w/ the discounts, but probably not the best to do w/ the credit scores and all. But i figure i have plenty of cards open w/ mad credit, and i personally don’t like having random cards out there that i know for a fact i won’t be using.

  5. For credit building purposes… I have always advised personal secured lines of credit.

    Simply put money in an account. Your cards credit line reflects this balance.

    Safe, and effective.

Leave a Reply