Store Credit Cards vs. Cash-Back Cards: Which Should I Choose?

We've all experienced it. You’re at the checkout after a significant purchase or a long day of shopping, and the cashier mentions how much you could save by signing up for a store credit card.

It’s an enticing proposal. Who doesn’t want to save some cash? However, while the chance for immediate savings is appealing, store credit cards are often not the best choice.

Conversely, some store cards can be advantageous for specific shoppers. Let’s take a look at four popular store cards and see how they compare to four of our preferred cash-back credit cards.

What exactly is a store credit card?

A store credit card is issued by a particular retailer. Many of these are closed-loop cards, meaning they can only be used at that specific store.

This article focuses on open-loop cards. These cards feature a store brand in their name but can be used wherever other credit cards are accepted.

While you can use these cards like any other, some restrict your rewards to their particular store. Before applying for a store credit card, think about how much it will benefit you over time.

Is the Sephora Visa Credit Card worth it?

The Sephora Visa® credit card is attractive for two main reasons: it provides a 25% discount on your first purchase within 30 days of opening your account and offers the highest rewards for Sephora purchases compared to any other card.

The details for the Sephora credit card have been independently gathered by Dinogo. The information presented here has not been reviewed or supplied by the card issuer.

If you frequently shop at Sephora, this card might seem beneficial. However, many Sephora shoppers would be better served by a cash-back card, such as the Capital One Savor Cash Rewards Credit Card. Let’s take a closer look at the benefits of both cards:

sav

For Capital One products featured on this page, some benefits may be provided by Visa® or Mastercard® and can differ by product. Please refer to the respective Guide to Benefits for specifics, as terms and exclusions apply.

Conclusion: If your spending at Sephora exceeds your food expenses, the Sephora Visa card could be a worthwhile choice.

Otherwise, you would benefit more from the Savor card, which offers a more substantial welcome bonus and higher cash-back rates in bonus categories to offset your Sephora indulgences.

To find out more, check out our detailed review of the Capital One Savor card.

Discover more: Capital One Savor Cash Rewards Credit Card

Is the Apple Card a good option for me?

The Apple Card might appear to be the ideal choice if you're planning a significant purchase from Apple.

The details regarding the Apple Card have been independently gathered by Dinogo. The information on this page has not been reviewed or provided by the card issuer.

While it may offer bonus rewards on your large purchase, it isn’t necessarily the top credit card for Apple purchases. Let’s see how it stacks up against the Blue Cash Everyday® Card from American Express:

* Eligibility and benefits vary by card. Terms, conditions, and limitations apply. For details, visit americanexpress.com/benefitsguide. Policies are underwritten by AMEX Assurance Company.

Conclusion: If you're contemplating the Apple Card for a significant Apple purchase, the Amex Blue Cash Everyday card is a better choice. With it, you can buy your Apple product online and earn 3% cash back.

Additionally, your purchase can contribute towards the spending threshold needed to qualify for the welcome bonus on your card, providing even greater rewards. Plus, you'll enjoy the security of American Express purchase protection against accidental damage or theft, a benefit not offered by the Apple Card.

If you frequently use Apple Pay or need to finance an Apple purchase, the Apple Card could be a viable option. However, if most of your shopping is done online, the Blue Cash Everyday card is the superior choice for earning 3% back on your Apple purchases.

For more details, check out our comprehensive reviews of the Amex Blue Cash Everyday Card and the Apple Card.

Is the Prime Visa card a good choice for me?

If you regularly shop at Amazon, you've likely considered the savings that the Prime Visa offers at checkout.

The Prime Visa is a solid card — but only in certain situations. Here’s how it compares to the well-liked Chase Freedom Flex®:

Conclusion: The Prime Visa is a great choice if a large portion of your spending goes to Amazon and Whole Foods, and you prefer an easy way to earn 5% on those purchases.

However, if you spend enough to fully leverage the Freedom Flex's 5% categories and often dine out, its higher welcome bonus and dining rewards may make it the more advantageous option.

Additionally, you can still earn 5% on your Amazon purchases by buying Amazon gift cards from retailers included in the quarterly categories, which you can then use for shopping on Amazon.

For more insights, take a look at our comprehensive reviews of the Freedom Flex and Prime Visa.

Is the Costco Card the right fit for me?

As a Costco member, you likely spend a significant amount there and want to ensure you’re earning rewards on those purchases.

However, when it comes to earning credit card rewards, Costco only accepts cards from the Visa network, which means you could miss out on rewards if your preferred card belongs to a different network.

The Costco Anywhere Visa® Card by Citi (see rates and fees) is one of our top picks among store cards, but that doesn't mean it's the ideal choice for everyone. Let’s compare it to a strong contender, the Wells Fargo Active Cash® Card (see rates and fees):

Conclusion: It's important to note that both cards offer 2% back on Costco purchases. However, if you primarily spend on gas, dining, and travel, the Costco Anywhere Visa has a rewards structure that may suit you better.

However, if you often shop outside of those categories, you'll earn more rewards with the steady 2% cash back from Active Cash. Additionally, its $200 cash rewards bonus is a valuable benefit.

If you don’t frequently shop at Costco and don’t have a Costco membership, the Active Cash card is likely the better option.

For more information, check out our in-depth reviews of the Costco Anywhere Visa and Wells Fargo Active Cash cards.

Other ways to save at your favorite stores

Having a card that provides additional rewards at your preferred stores isn’t the only method to maximize savings on your purchases. Here are some of our other favorite strategies to save no matter where you shop.

Utilize a shopping portal

Always take advantage of a shopping portal when shopping online. Platforms like Rakuten let you earn extra cash back or rewards points on numerous store purchases.

These rewards can be combined with any credit card offers and bonus category rewards you receive, so be sure to make the most of them.

Review your merchant offers

Regularly review the merchant offers available on all your credit cards, and add any that might be useful to you. We suggest keeping a note on your phone to track which offers are linked to which cards, making it easier to refer to them when you're ready to shop.

Purchase gift cards

If you have a credit card that offers bonus points for purchases at grocery or office supply stores, consider buying gift cards from these locations for other stores you plan to shop at.

Although this approach adds an extra step, it lets you earn bonus points on specific store purchases without needing a store credit card. Just be cautious not to buy gift cards solely to meet a welcome offer requirement, as issuers typically frown upon this and may close your account.

Final Thoughts

We typically advise against opting for a store credit card in favor of a rewards card that offers a more attractive welcome bonus and better earning potential. Nonetheless, certain store cards, such as the one from Costco, can be worthwhile exceptions.

Ultimately, treat your choice regarding a store credit card as you would any significant financial decision: conduct thorough research instead of succumbing to a tempting offer at the checkout. Regardless of your choice, you'll feel satisfied knowing you're earning valuable rewards on your expenditures.