Holiday Spending with Store-Branded Credit Cards: Helping or Hurting?
- November 29, 2017
- Posted by: Andrew Rombach
- Category: Credit Cards
With the holidays now in full swing, spending is at an all-time high. Business is booming and plenty of stores and retailers are looking to cash in on some of the biggest spending days of the year.
Certainly, consumers will be spending like crazy - much of which will be done with credit cards. For a business looking to capitalize on America’s end-of-year spending, this presents an interesting opportunity: offering a store-branded credit card.
These credit cards generally work the same way as a normal credit card, but there are a few important caveats that make a big difference.
These store credit cards often come with above-average interest rates and many offer zero percent deferred interest over an intro period. If consumers can’t pay everything off in that intro period, then they're on the hook for all of the interest. This is very different from the standard waived interest that many typical credit cards offer.
Rewards on store credit cards are also often tailored towards in-store purchases and offer very little in cash back elsewhere. Furthermore, unlucky consumers often find that these rewards expire before they can put them to use.
Despite these negatives, consumers continually sign up for store-branded credit cards every year.
During the holidays, many consumers spend whatever credit they have at their disposal, including store-branded cards. After the holiday season, the lack of rewards and high APRs on these cards may leave consumers with some big regrets.
Here at LendEDU, we decided to do a bit of digging into the store-branded credit card business. We conducted a survey to store-branded cardholders to gauge their overall feelings, understanding, and regrets about these unique credit cards.
In addition to this survey, we also researched some of the most popular store credit cards available today. We built a table that lets you see which cards offer the lowest APRs, the best introductory bonuses, and the best cash back rates. We also highlighted a few deals that we thought were a little suspect.
Full Poll Results
1) Which of the following reasons best explains how you signed up for a store branded credit card?
a. 47.6% of respondents said they were "pitched a store-branded card at the cash register in the store"
b. 26.79% of respondents said they "applied for a store-branded card on their own after seeing an online ad"
c. 15.88% of respondents said they "applied for a store-branded card on their own initiative after seeing an ad offline"
d. 9.58% of respondents said they "received a pre-approved offer via email or mall"
2) How many store-branded credit cards do you have?
a. 32.24% of respondents had only "one" store-branded credit card
b. 37.09% of respondents had "two" store-branded credit cards
c. 18.30% of respondents had "three" store-branded credit cards
d. 12.36% of respondents had "four or more" store-branded credit cards
3) Do you plan on applying for another store-branded credit card in the next 12 months?
a. 48.85% of respondents said "yes"
b. 51.15% of respondents said "no"
4) Which of the following benefits enticed you the most to apply for a store-branded credit card?
a. 58.91% of respondents said they were "enticed by an immediate discount at a certain store"
b. 22.18% of respondents said they were "enticed by the zero interest rate introductory offer"
c. 11.88% of respondents said they "needed more credit for the holidays"
d. 7.03% of respondents said referred to "other" reasons
5) How often do you use your store-branded card at the store that issued the card?
a. 55.15% of respondents said they use their cards "once a month or more"
b. 28.97% of respondents said they used their cards "once a quarter"
c. 10.18% of respondents said they use their store card "once every six months"
d. 5.70% of respondents said they use their store cards "once a year"
6) Which of the following best describes your store-branded credit card usage?
a. 78.79% of respondents said they "only use their store-branded credit card at the store it is branded with"
b. 21.21% of respondents said they "use their store-branded credit card at other stores"
7) Do you know the current interest rate on your store-branded credit card?
a. 55.39% of respondents said "yes"
b. 44.61% of respondents said "no"
8) Do you regularly carry a month-to-month balance on your store-branded credit card?
a. 65.21% of respondents said "yes"
b. 34.79% of respondents said "no"
9) Have you ever maxed out your credit limit on your store-branded credit card?
a. 35.03% of respondents said "yes"
b. 64.97% of respondents said "no"
10) Do you know the difference between a deferred and waived interest rate introductory offer?
a. 55.52% of respondents said "yes"
b. 44.48% of respondents said "no"
11) Have you spent more money at a certain store with your branded credit card just to reach a rewards program spending threshold?
a. 41.33% of respondents said "yes"
b. 58.67% of respondents said "no"
12) What percentage of your holiday credit card purchases will be placed on a store-branded credit card? (Respondents selected from a range of 0% to 100%)
-Average percentage of expenditures - 42.0%
-Median percentage of expenditures - 46.0%
-2.08% of respondents used a store-branded card for 0% of holiday expenses
-19.15% of respondents used a store-branded credit card for 1 to 20% of holiday expenses
-24.36% of respondents used a store-branded credit card for 21 to 40% of holiday expenses
-30.91% of respondents used a store-branded credit card for 41 to 60% of holiday expenses
-18.06% of respondents used a store-branded credit card for 61 to 80% of holiday expenses
-5.45% of respondents used a store-branded credit card for 81 to 100% of holiday expenses
13) Have you fully paid off your store-branded credit card debt from the previous holiday season?
a. 74.67% of respondents said "yes, I paid it off"
b. 15.76% of respondents said "no, I didn't pay it off"
c. 9.58% of respondents said "I never went into debt"
14) Have you ever been hit with an unexpected fee while holding a store-branded credit card?
a. 27.03% of respondents said "yes"
b. 72.97% of respondents said "no"
15) Is your store credit card a necessary tool for meeting holiday expenses?
a. 53.09% of respondents said "yes"
b. 46.91% of respondents said "no"
16) Did you read the terms & conditions on your store credit card offer before applying?
a. 61.21% of respondents said "yes, I fully read the terms & conditions during the application process"
b. 35.15% of respondents said "no, I didn't fully read the terms & conditions during the application process"
c. 3.64% of respondents said "no, I was not provided terms & conditions during the application process"
17) Do you regret opening a store-branded credit card?
a. 14.3% of respondents said "yes, I regret opening a store-branded credit card"
b. 85.7% of respondents said "no, I don't regret opening a store-branded credit card"
Interesting Highlights from the Poll
Store-Branded Card Coverage of Holiday Spending
We asked card holders to judge how much of their credit card holiday spending was going to be put on their trusty store-branded cards. We found that the plurality (30.91 percent) intend to cover between 41 and 60 percent of their holiday expenses.
Store-branded cards are often offered at department and clothing stores throughout the nation. Consumers flock to these year-after-year to buy gifts for all of their loved ones, so the considerably high numbers are justifiable.
We followed this up with another question to see if store-branded cards were necessary for the holidays. We found that roughly half, or 53.09 percent, of card holders look at their store-branded cards as necessary tools to meet holiday expenses.
Consumers Spend for Rewards & Max Out Limits
Store-branded credit cards are notorious for offering rewards and discounts to incentivize spending, but they often come with a catch - you need to reach a spending threshold to get anything. After asking consumers about this, we found that 41.33 percent of store-branded card holders spend more money just to reach a spending threshold for a introductory rewards program.
Furthermore, a solid 35.03 percent of respondents admitted to maxing out the credit limits on their store-branded credit cards at least once. Although this is a minority, it is still a startling number.
Store cards are renowned for their high and unforgiving APRs. Many come with deferred zero interest rate offers for a few months, but if the balance isn't paid in full by the end, card holders are on the hook for full interest charges.
Another survey question found that a big group of respondents, 44.48 percent, didn't understand the difference between deferred and waived interest rate offers, and 44.61 percent of respondents didn't know the interest rates on their cards.
It's easy to assume that if card holders are maxing out their cards, they're going to be hurting from interest.
Balances Are Being Rolled Over Despite High APRs
Store-branded credit cards come with above-average APRs that can cause big problems for anyone who plans on rolling a balance over from month-to-month. Despite this, 65.21 percent of respondents said they regularly carry a month-to-month balance on their store-branded cards.
Carrying a balance of on a credit card simply costs more money for the consumer, albeit it's probably necessary if you're maxing out your card. This is how credit card issuers make money when extending credit. In this case, a store could make even more on a consumer buying their products.
Perhaps consumers are rolling over balances without realizing the repercussions.
Terms & Conditions Not a Concern for Some
While most card holders read the terms and conditions, a good number, 35.15 percent, did not read the terms when applying for a store-branded credit card. Understandably, the terms and conditions on any financial product are important. This lack of diligence might explain why a good portion of card holders didn't know their APRs.
Understandably, the terms and conditions on any financial product are important. This lack of diligence might explain why a good portion of card holders didn't know their APRs.
This one speaks for itself. Despite some of the things we learned through this survey, store-branded credit card holders do not regret opening up a card. In fact, an overwhelming majority of 85.7 percent are OK with their decision. Happy spending!
Most Popular Store-Branded Credit Cards
Below we researched the top 20 most popular store-branded credit cards by monthly search interest. Below you'll find the following details for each card: the number of online searches per month, the standard purchase APR, the introductory offer attached to the card, and the maximum rewards discount rate (typically the in-store discount rate). All details are updated as of November 27th, 2017.
|Card Name||Monthly Searches||APR||Intro Bonus||Rewards|
|Walmart Credit Card||550,000||23.25||$35 one time discount||3|
|My Best Buy Credit Card||550,000||26.24||-||5|
|Old Navy Credit Card||450,000||25.99||20% one time discount||5|
|Lowe's Advantage Card||246,000||26.99||$30 one time discount||5|
|Kohl's Charge Card||246,000||24.99||25% one time discount||5|
|Victoria's Secret Angel Card||246,000||25.99||$15 one time discount||3|
|Home Depot Credit Card||246,000||26.99||-||0|
|Amazon Prime Rewards Visa Signature Card||201,000||23.24||$70 one time discount||5|
|JCPenney Credit Card||201,000||26.99||15% one time discount||1|
|Macy's Credit Card||201,000||26.24||20% one time discount||1|
|The Banana Republic Card||165,000||25.99||20% one time discount||5|
|TJX Rewards Credit Card||165,000||27.99||10% one time discount||5|
|GAPCard||165,000||25.74||20% one time discount||5|
|Target REDcard||90,500||23.9||20% one time discount||5|
|Nordstrom Retail Credit Card||74,000||23.9||$10 one time discount||2|
|Shell Drive for Five Card||74,000||25.99||25¢ discount per gallon||1.5|
|GameStop PowerUp Credit Card||74,000||27.99||$5 one time discount||1|
|AEO Credit Card||74,000||25.99||20% one time discount||6|
|"R"Us Credit Card||74,000||26.99||15% one time discount||8|
Notable Store-Branded Credit Cards
Highest APR (tie) – TJX Rewards Credit Card & GameStop PowerUp Credit Card
These two store-branded credit cards top the list in terms of APR, coming in with 27.99 percent. If you plan on racking up a balance on either of these credit cards, make sure you pay your balance in full as soon as possible. Interest starts accruing on balances each day after spending with the card.
Expiring Rewards – GameStop PowerUP Credit Card
If you plan on opening up a GameStop-branded credit card for the holidays, think again. For starters, in order to earn the head line offer of 5,000 bonus points, you need to spend a minimum of $250 – for a $5 reward. Furthermore, these points have a hard expiration date set for December 31, 2017. There’s more, however. You can earn 15,000 points, or $15, as opposed to 5,000 points, but you need to become a Pro or Elite Pro member at the cost of $14.99 and $29.99, respectively.
Tiered Status System – Macy’s Credit Card & Victoria’s Secret Angel Card
Both of these store-branded credit cards come with a tier system for their members. These systems incentivize cardholders to spend money at their respective stores.
With the Macy’s Credit Card, you start out at Silver status, and you need to spend between $500 and $1,199 at Macy’s. You can reach Platinum status if you spend $1,200 or more. In order to get the best discount of 5 percent with the Macy’s card, you need to be a Platinum status cardholder.
With the Victoria’s Secret Angel Card, you can earn $10 back per $250 spent as an Angel or VIP cardholder, and you can get $15 back per $250 if you’re a Forever cardholder. You must spend $500 in a calendar year in order to be upgraded to VIP status, and you need to spend $1,000 in a calendar year to be upgraded to Forever status.
Lack of Rewards – Home Depot Credit Card
The Consumer Credit Card from Home Depot comes with a nice APR of 26.99 percent, but it doesn’t actually offer a rewards program to cardholders. However, it does come with an underwhelming deferred interest deal. Cardholders can try to take advantage of special financing on purchases – so long as they exceed $299. If you pay that balance off in 6 months, then you don’t have to worry about interest. If you don’t, then you’ll be on the hook for that 26.99 percent APR.
These questions were run through survey company Pollfish. Answers from 825 respondents were collected. To be included, a respondent was required to have and used a store-branded credit card within the last year.