Reasons to reconsider opening a store credit card during the holiday season

Recently, I visited Home Depot with my mom to pick up some essentials like lightbulbs and air filters. A cheerful employee in the store's signature orange apron welcomed us.

The employee then presented my mom with the chance to open a Home Depot credit card and save $25 on her purchase — nearly covering the cost of her entire cart. As she reached for the application, my instincts as a credit card enthusiast kicked in, triggering a reaction akin to a panic attack. I was determined that no one was signing up for a store credit card just for a $25 bonus while I was around.

During the holiday season, it’s particularly easy to be swayed by an in-store credit card pitch at the checkout. Many retailers will offer a 10% or 20% discount if you apply for a card right away. While saving even $50 or $100 can be appealing, there are numerous reasons to steer clear of store credit cards. Additionally, there are shopping strategies (like making purchases through an online portal) that can provide you with similar discounts without the impact of a hard credit inquiry.

When considering a new card, opt for a genuine rewards credit card rather than a store-branded one. The miles, points, or cash back earned from these cards (including select no-annual-fee options) can far exceed a one-time discount at checkout. They often feature enticing sign-up bonuses worth hundreds in cash back or even thousands in travel rewards. Additionally, their ongoing benefits can deliver substantial value over time.

The potential downsides of store cards on your credit score

Understanding the significance of a good credit score is common knowledge. This score is crucial for banks assessing your creditworthiness when applying for various loans, including auto loans, mortgages, and credit cards. However, many are unaware of the components that influence this score. One key element is payment history, which is why we always emphasize the importance of paying card balances promptly and in full each month.

Another crucial component (accounting for 30% of your credit score, as per FICO) is your credit utilization ratio, which measures the ratio of your card balances to your total available credit across all cards.

From my observations, the credit limit on a store credit card often aligns closely with your purchase amount. For example, if you're spending $1,000, you might receive a $3,000 credit limit. While your credit utilization score is generally calculated based on your total balances compared to your overall credit line across all cards, creditors sometimes also evaluate your utilization per individual card. In this case, your new card's utilization ratio would be an alarming 33%, which could adversely affect your credit score.

It's advisable to maintain your credit utilization below 10%. Personally, I aim for 3% or lower, which requires me to pay off significant purchases promptly. Always remember to spend only what you can afford to pay off entirely, and consider settling your balance before the billing cycle closes.

Take advantage of shopping portals and discounts offered through rewards cards with retailers

You don't have to rely on a store credit card to save money or receive discounts while shopping. For instance, online shopping portals provide a straightforward way to accumulate substantial bonus miles, points, or cash back from numerous well-known retailers. We've observed offers such as 15% cash back (or 15 Amex points per dollar) through Rakuten at many popular stores during Black Friday and Cyber Monday, and similar deals will likely reappear throughout the holiday season.

Almost every airline, hotel, or financial institution has its own shopping portal designed to help you earn rewards while shopping online. Many retailers now offer the option to shop online and pick up items in-store, making these portals an effortless way to enhance your rewards for each purchase.

Check out our guide on maximizing online shopping portals to discover how to easily identify which portal provides the best return rate for your purchases.

The top American Express cards include Amex Offers, which are essentially enhanced coupons that allow you to rack up bonus points or save money on both in-store and online purchases. These tailored offers feature incentives like 20,000 bonus points for reaching a specific spending threshold, 10% discounts at popular retailers, or statement credits exceeding $100 when shopping with select merchants. Often, you can stack these offers with other coupons or promo codes for even greater savings.

Save our Amex Offers page to stay updated on the latest deals — and discover how to combine multiple offers in our guide to optimizing holiday spending.

Final thoughts

Rather than succumbing to a store credit card, leverage shopping portals or rewards card promotions for similar savings. You can also explore our best credit card offers page for superior alternatives that provide lasting value. Look for travel and cash-back credit cards offering $750 or more in cash back after meeting minimum spending thresholds — some without any annual fees. Additionally, check out our guide to sign-up bonuses exceeding 100,000 points, which we regularly update. These bonuses can yield substantial value, translating into hundreds of dollars in cash or thousands in travel rewards.