Are retail cards the easiest credit cards to get approved for?

Two young women comparing shopping hauls and chatting about retail credit cardsImage: Two young women comparing shopping hauls and chatting about retail credit cards

In a Nutshell

Consumers are often told that store cards are easy to get and can help them build credit. That's generally true, but there are some risks and caveats to keep in mind.
Marcie Geffner is a personal finance writer and has written for PNC Bank, Key Bank, BMO Bank, J.P. Morgan, Peoples Bank, Union Bank, LoanDepot, LendingTree and American Express. Editorial Note: Credit Karma receives compensation from third-party advertisers, but that doesn’t affect our editors’ opinions. Our third-party advertisers don’t review, approve or endorse our editorial content. It’s accurate to the best of our knowledge when posted.

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Do you have a short credit history or less-than-perfect credit? You may have heard that retail credit cards are easier credit cards to get with your credit profile.

It’s generally believed that retail credit cards (sometimes called “store” credit cards) come with a greater likelihood of approval. But they may also come with some big negatives, such as relatively high annual percentage rates (APRs) and steep penalty fees.

Given the pros and cons, are retail cards worth the potential disadvantages for consumers looking to improve their credit?

The answer is more complicated than yes or no.

Are retail credit cards easier to get approved for as a category?

Generally speaking, yes. Retail cards tend to be easier to get approved for than many unsecured credit cards offered by major credit card companies.

“Retail store card issuers are generally more likely to approve people with lower credit scores,” says Freddie Huynh, vice president at Freedom Financial Network, a debt settlement, mortgage shopping and personal loan company based in San Mateo, California.

Why is this the case?

Because retailers benefit from approving people who want their cards, explains Soneyet Muhammad, formerly of Clarifi, a consumer credit counseling nonprofit.

“You’ll likely shop at their store more often, and the retailer will boost their bottom line with any fees or interest charged,” Muhammad says.

The two types of retail credit cards: Closed-loop and open-loop

Some stores, such as Walmart, offer two types of retail cards.

A closed-loop retail card can only be used at a specific store or group of stores. You can usually identify these cards because they don’t have a network logo (such as Visa or Mastercard) on them.

An open-loop retail card, on the other hand, usually does have a network logo on it and can be used at any location that accepts that network. The Walmart Mastercard, for example, can be used anywhere Mastercard is accepted.

Whether a closed-loop or open-loop credit card is easier to get depends on the retailer’s specific guidelines. Closed-loop cards may be easier to get than open-loop cards, says Melinda Opperman, president at, but most of the evidence is anecdotal and depends on the individual retailer in question.

Can retail cards help you build or rebuild credit?

Again, the answer is generally yes.

Retail cards can help you build credit if they report your payment history to the major credit bureaus. However, because of their typically high interest rates, retail cards should be considered “only if you are absolutely positive you will be able to pay off the balance in full every month, on time,” Huynh says.

If you don’t pay off your balance in full at the end of every billing cycle, Huynh warns, interest charges can get out of control. In fact, what you end up paying in interest could be equal to or more than the value of any savings you get from using the card.

Which (if any) retail credit cards are right for you?

Choosing which retail card to apply for isn’t much different from choosing any other type of credit card.

“You want to look at the interest rate, limit and fees that come with the card,” Muhammad says.

A credit card’s interest rate is the price you’ll pay for borrowing money. For credit cards, interest is typically expressed as a yearly rate known as the annual percentage rate, or APR. With most cards, you can avoid interest charges by paying off your balance in full and on time each month.

The credit limit is the maximum amount the issuer of the card will allow you to charge on that card. Retail cards typically offer lower credit limits than other credit cards — part of what makes them easier to obtain.

Credit card fees are what the credit card company might charge you if, for example, you make a late payment or attempt to charge more than your credit limit allows.

When choosing which retail card(s) you want, it’s smart to distinguish between cards from stores where you actually shop and cards from stores where you may be tempted to overspend, Muhammad says.

“Think about opening the card at a time when you’ll actually need it, like for back-to-school shopping,” she says.

What other types of credit cards are easier to get approved for?

Consumers who want to rebuild their credit should consider getting a secured credit card from a bank or credit union, Muhammad says.

To get a secured card, you’ll generally need to make a deposit that’s equal to the limit you can charge on the card. The initial limit might be low, such as $300. Over time, if you use the card responsibly, you may be upgraded to an unsecured card or get access to a higher credit limit on your secured card.

While there’s no such thing as guaranteed approval, Opperman says approval for a secured card is more likely. One reason for this is that the card is secured by the deposited funds.

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Prepaid cards and debit cards, on the other hand, won’t help you build up a credit history. Purchases and payments made with these types of cards aren’t reported to the major credit bureaus that track consumers’ use of credit and produce credit reports and scores, Huynh explains.

“Prepaid cards are more like gift cards, with payment information not recorded or reported to the credit bureaus and thus not helping to build a credit history,” he says.

What should you consider before applying for a retail card?

One thing to consider is that cards with higher credit limits can be more beneficial if you need to improve your credit, Opperman explains.

“This is not so you can run up high balances,” she says. Instead, it’s a way to keep your credit card utilization low.

Credit card utilization refers to how much of your available credit you use at any time. Most experts recommend keeping your overall credit card utilization below 30%. Lower credit utilization rates suggest to lenders that you can use credit responsibly, so they’re generally correlated with higher credit scores.

Bottom line

Retail credit cards are generally easier credit cards to get and may come with points, coupons or other perks from the retailer. The tradeoff is that these cards usually have higher APRs and lower credit limits than many unsecured credit cards offered by major credit card companies.

Hear from an expert

Q: What are other ways for people to build credit besides opening a retail credit card?

A: In addition to retail credit cards, consumers can also build credit through other types of loan and payment plans. For example, car loans, apartment rent, phone payments and utilities could all be ways to establish credit.

Q:  What should consumers be wary of when considering a retail credit card?

A: While retail credit cards can be easy to obtain, consumers should be wary. For example, imagine you are shopping at a national retailer, and it offers you 10%–20% off your purchase if you sign up for its credit card. Should you apply for the card? Some might quickly respond “yes” because there are savings involved. However, consumers need to look at how many credit cards they have and the impact of an additional card on their credit scores.

Consumers should also review the terms of the credit card and pay careful attention to late fees and interest rates. Retail credit cards typically have higher interest rates and late fee penalties. Consumers should consider how often they purchase from the retailer and if the card can be used at other retailers. If you are a regular customer of the retailer, then maybe a credit card makes sense. However, if you doubt you will make additional purchases, the retail card might not be the best choice. 

Dr. Jane Boyd Thomas, Professor of Marketing, Winthrop University

About the author: Marcie Geffner is an award-winning freelance reporter, editor, writer and book critic. Her work has been featured online and in print by the Chicago Sun-Times, Fox Business Network Online, Los Angeles Times, The Washi… Read more.