Why Do Retail Stores Push Their Own Credit Cards?

“Would you like to save 15 percent by signing up for our store card today?” We’ve all heard the script, and we’ve all likely responded with a polite but firm “no!” more than once. This well-oiled sales tactic is a familiar part of the routine for most shoppers. 

But why do retail employees take the time to ask customers, again and again, about their interest in these cards? Behind that pitch is a massive revenue machine that turns your one-time discount into long-term profit.

1. What are store credit cards?
2. Are store credit cards worth it?

What are store credit cards?

Store credit cards, also known as private-label cards, are “closed loop” credit cards. That means you can only use them at the store (or chain of stores) that issued the card. 

Unlike traditional credit cards—which work pretty much everywhere—store cards trap you inside one retail ecosystem. This makes it great for the retailer, but not so great for the flexibility of the customer.

Store cards drive loyalty. One market study found that more than 60 percent of consumers with a store card said they shopped more often at that retailer.

Retailers also save money on transaction fees by running their own payment systems. Credit card companies typically charge merchants a processing fee for every swipe, but if the store issues the card and processes the payments internally, it keeps more of that money. On top of that, every purchase you make on a store card feeds valuable data back to the retailer. This data lets them market to you as efficiently as possible, which causes the cycle to loop again and again.

Employees are often pressured (or heavily incentivized) to push these cards. Many are given sales targets or cash bonuses based on how many signups they can generate. Some former retail workers have called it the worst part of the job: One even noted that they were required to ask twice, even after a customer declined the first time. “No,” apparently, isn’t always a complete sentence in the eyes of corporate policy.

Are store credit cards worth it?

It really depends on two things: How often you shop at that particular store, and how good you are about managing debt.

While some cards offer decent point systems or signup discounts, they almost always come with a catch: sky-high interest rates. Most store cards hover around 29 percent APR, and some climb even higher. Even just applying can knock your credit score down a few points. And if you don’t use the card responsibly, it can ding you even more.

If you’re a diehard shopper at one specific store, and you never carry a balance, a store card might be OK. But for most people, the better move is to just smile, shake your head, and keep on declining.

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