The first thing you should know about shopping credit cards is that they are delicate. You need to use them carefully. If you have discipline and strategy in mind, they can help you get amazing deals, rewards, and help build your credit score.

If not, you can easily get into a loop with constant interests. This is particularly important because shopping cards usually have higher interest rates. So let’s see what cards for shopping have to offer and how you can use them to your advantage.

How shopping credit cards work

  • A shopping credit card is similar to a general-purpose credit card, but it can only be used in a certain retail store or chain.
  • Like with other credit cards, it allows you to buy products through a credit that you can pay off each month.
  • If you don’t repay your balance in full, you will have to pay interest.
  • They come with higher interest rates.
  • You might get offered with one at the store or apply for it online.
  • Shopping credit cards offer discounts, vouchers, gifts, and so on.
  • A person needs to be 18 years old to hold a shopping credit card.

Don’t confuse shopping cards with co-branded cards

Shopping credit cards are similar to many other credit cards, but they aren’t the same. This means that you can easily mix them up and make costly mistakes. Many people confuse shopping credit cards with co-branded cards, and we can’t blame them.

A lot of providers and card issuers call their co-branded cards shopping credit cards. In a way, they are, but not entirely. These cards are basically a mixture of general-purpose cards and shopping cards. Simply put, these cards have the name of a card issuer as well the store brand on them.

This is because they can be used both in their store but also pretty much everywhere else where financial institutions behind the card (Visa, Mastercard) allow it to be used. At the same time, they offer some benefits when using them at certain retail stores. However, “real” shopping cards are the ones that can only be used in designated stores and nowhere else.

Other commonly used names of shopping cards used are merchandise credit cards or store cards.

Shopping credit cards have the name of the retail brand only without a financial institution.

Shopping credit cards are unsecured cards

If you read our “Credit Card Essentials You Need to Know” you might have already guessed that shopping credit cards fit into the unsecure category. However, this doesn’t mean that they pose any risk towards cardholders if they use them properly.

They don’t require any money to be put down when getting them. In most cases, unsecured credit cards have lower interest than their counterparts. Like shopping cards, most unsecured options offer various rewards.

On the other hand, secured cards don’t come with rewards. However, most unsecured credit cards require extensive credit score checks by the issuers, but shopping cards are unique because they have instant decision and don’t come with any major checks.

Even though merchandise credit card offers come for free doesn’t mean that they don’t cost you anything in the long run.

How is shopping credit card interest calculated?

With increased financial flexibility and reward programs, shopping cards can offer a lot to consumers. However, you need to know how the interest of your card works to be able to get the most out of the benefits your card provides.

In a perfect world, nobody ever misses their monthly payments nor carries a balance on their credit cards. But in reality, a lot of people are often forced to carry over a balance from one month to another. What’s the issue with having a balance, you ask? Usually, it comes down to APR.

Defining interest and APR of shopping credit cards

All shopping card offers come with interest rates. There simply needs to be a way for cardholders to pay for borrowing money essentially. Simply put, the interest rate represents a fee you have to pay for using money that doesn’t belong to you.

For most credit cards, including shopping, the interest rate is usually expressed on a yearly basis. This is done through the APR or the annual percentage rate. Even though the APR serves as an annual rate, all credit companies will use it to determine the interest they charge on a monthly basis.

Types of APR

When getting your store credit card, you need to inspect various details so that you know how much you will have to pay for your fees in case of negligence. Some cards have variable APR while some have fixed APR:

  • Variable APR: Cards with variable APR usually have a prime rate to start off, and then they add margins. The APR changes along with the prime rate and results in the final variable.
  • Fixed APR: Cards with fixed APR usually don’t change. However, in some circumstances, they can be adjusted. For example, if the cardholder is more than 2 months late with payments, it can change. Some cards have an introductory fixed APR which changes after some time.

These are the two most general types of APR, but there are 5 other you should be aware of:

1. Penalty

This APR includes charged interest for late payments or in case the user violates some terms and conditions of the card. This is one of the most rigorous APRs, and it’s usually imposed when the payments have been late for over 60 days.

2. Introductory

This is a limited-time APR which is designed as a promotion to help attract users. This APR usually applies to balance transfers or purchases for a limited amount of time. In some cases, it can be both. This APR is always lower than the regular one that comes after. Sometimes, the introductory APR is set at 0%.

3. Cash advance

The cash advance APR applies an interest rate on the amount the user borrows from their credit card. The interest is typically higher and doesn’t come with a grace period. Simply put, when you get cash advance through your card, you will instantly start paying interest after the transaction.

4. Balance transfer

When using balance transfer cards to transfer an amount from one card to another, the amount transferred usually comes with interest.

5. Purchase

The purchase APR involves interest applied on every purchase that has been made through the credit card.

Calculating shopping credit card interest

You can calculate the interest of your merchandise cards in 3 simple steps. It might look complicated at first, but once you understand it, you will be able to do it in just a few minutes. To do this properly, you will need the card billing statement because it contains some vital information.

Here are the 3 steps you need to take:

Step 1: Calculate your daily rate

Given the fact that the credit card interest is calculated daily, the first thing you need to do is calculate your daily APR. Simply divide the APR by 365, and you will get your daily periodic rate or periodic interest rate.

Step 2: Calculate the average daily balance

When you look at your statement, you will see the days which are included in the billing period. The interest charge you get is determined by the balance you have on these days. Start from the unpaid balance which is the amount you carry from one month to another.

When you purchase something, this balance rises, and when you make payments, it drops down. Look at the transaction information and go over each day in the billing period and write them all down individually.

Once you’ve done that, add all daily balances. When you get the result, divide it by billing period days. This is how you will calculate the average daily balance.

Step 3: Combine them together

The third step towards calculating your interest is to multiply the daily rate with your daily balance. The result you get then needs to be multiplied by the number of billing period days. Your result might vary slightly depending on how the issuer calculates your interest, but the differences won’t be significant.

Calculate your interest regularly as a lot of shopping cards change it really often.

Minimum payments and cards for shopping

The shopping card minimum payment is the minimum amount that absolutely needs to be paid each month. It’s a vital part of the agreement terms. In case the card owner doesn’t make the minimum payment, he or she can expect charging fees. They can also lose special rates.

If the cardholder skips multiple minimum payments, the card will get defaulted. This means that you won’t be able to use the card. The issuer will ask you to give it back and repay all of the credit debt you might have.

What is the minimum payment for shopping cards?

The minimum payment amount is different from one card to another. It all depends on the shopping card offer and the company that issues them. However, with card offers for shopping, the minimum is generally around 5% of the total amount that the holder owns.

It’s usually higher than with general-purpose credit cards because shopping offers have higher interest rates. However, shopping cards also have a lower credit limit.

What this means is that, even if you have a 5% minimum on your balance, it could be lower than the 2.5% minimum on general-purpose credit cards as their balance is quite higher.

When getting a store credit card, you will get information about the minimum payment. Additionally, when you already have one, you can check the exact minimum payment on the card statement.

Merchandise credit cards and credit score

A lot of people get offered a shopping credit card at the register to get a discount, and without thinking, they get one. However, making this decision impulsively is not always smart because you can end up hurting your credit score.

However, when using the store credit card the right way, you can actually use it to build your credit. It’s a double-edged sword, and you need to know all the factors that affect your credit score so that you can make informed decisions.

Credit score explained

The credit score is determined based on the information in your credit report. A credit score is basically a number that tells lenders how reliable you are for loans in different kinds of forms. Lenders assess potential customers by determining their credit score.

However, all lenders use different criteria for assessing potential customers, and they might give you a different score. However, the number won’t be that different. The credit report information you provide to lenders when getting a credit card lets issuers determine:

  • If they will give you a loan
  • How big your interest will be
  • Which amount they should lend you

The latest information you have on your credit report has the most significance because lenders are mostly interested in your current financial state. All the financial decisions you’ve made in the past 5 years will be laid out on the record.

Maintaining your credit score on a regular basis is essential because it can help you get the best credit cards, financial contracts, loans, and help you get better conditions in any kind of financial deal.

Can a shopping credit card be used for improving credit score?

A shopping credit card can be used for building strong credit. Even though shopping credit cards have lower credit limits compared to general-purpose cards, they can be used to improve the credit score. The first important thing is to keep the balance below a third of your credit limit.

Some merchandise credit cards fit into the “credit-builder cards” category. These are good for people with poor credit history. They are easily approved to anyone even if they have poor credit. If you have a bad credit history or no credit history, these cards are a good choice.

This is why these cards have high-interest rates and low credit limits. If you use these kinds of cards while paying off all bills on a regular basis, you can improve your creditworthiness and your credit score. This opens up new opportunities for loans or other cards in the future.

Dont rush into getting a shopping card with the promise of improved credit score. First, read carefully offer terms & conditions, analyze your financial options and whether you will be able to use the card properly towards improving your credit score.

Determining the shopping credit utilization ratio

We mentioned that keeping the balance below 30% of your credit limit is good for your credit score. This is because the used credit limit carries a lot of value. The current debt compared to the remaining credit limit is defined as a credit utilization ratio.

Keeping the credit utilization ratio as low as possible also helps improve your credit score. For example, if your shopping card’s credit limit is $1000, you should never have a balance that’s over $300. If possible, keep it even lower. You can also adopt the strategy of making smaller charges on your merchandise credit card and paying them off entirely every month.

This is how you show future and current lenders that you are responsible for handling your credit. By doing this, you can get greater limits on your shopping cards which will allow you to boost your credit score even further.

How to calculate credit card utilization

Calculating credit card utilization is even easier than calculating your interest rate. Like with interest rates, you will need the card billing statement. Additionally, if you have one, you can log into your online account to get all the relevant information.

If not, simply call the customer service line of your credit card provider to get information about your unsecured credit limit and the latest balance. The latest edition of your credit report also might be quite handy as it has all the important account information.

Step 1: Find your current credit limit and balance

The latest card billing statement has your credit limit and current balance. If you can’t find the limit there, make sure to call the customer support of your credit card provider.

Step 2: Divide balance by your credit limit

Enter your balance number in a calculator and simply divide it with your credit limit.

Step 3: Multiply by 100

In the end, multiply the result you’ve gotten by 100. This is how you will get an accurate credit utilization percentage.

Remember that it’s generally a good idea to keep your credit utilization percentage under 30%. Bear in mind that the best credit holders have around 10%.

If your goal is to improve the credit score, always make sure to keep credit utilization in check and keep it around 10% to get the best results.

Shopping card impact on credit history

Your credit card history is nothing more than a pile of information concerning your spending habits and credit behavior. The credit history affects your overall credit score, and this is why it’s important to have consistency. Building a good credit score takes time.

Luckily, shopping credit cards can be used for improving your credit history and building up your credit score from scratch. Unlike other credit cards, getting a store credit card doesn’t undermine your credit score.

They are a great way to build a new file along with your credit history by using the card responsibly make payments on time, keep your utilization under 30% and, over time, you will build a better credit history.

Where do shopping credit card rewards come from

Credit cards aren’t given to users for free, and issuers also have to make money off them. The 3 main sources of revenue for card issuers include:

  • Fees
  • Interest
  • Interchange

Even though you’ve probably heard of fees and interest, chances are you’ve just heard about interchange for the first time. Every time you use your card, the merchant needs to pay for a fee for the payment to be accepted. A part of this fee goes to the card issuer which can range from 1% to 3% of the purchase along with a flat fee.

Fees, Fees, Fees

This is called the interchange fee. These fees can vary from many things, including card type, country, merchant, and so on. Even though you as a credit card user won’t see them mentioned anywhere when getting your own credit card, you will be paying for these fees the whole time you are using your credit card.

Some stores that give out shopping card also come with usage fees through which they return a percentage to their users through rewards. On the other hand, there are stores that have no usage fees, but they incorporate these expenses and rewards into product prices. Given the fact that you can use their shopping offers to buy their products only, they are still able to make revenue.

Shopping card rewards aren’t for free, and your issuer isn’t doing you any favors.

Shopping/ Merchandise card credit limits

Merchandise cards have low credit limits in most cases, but in the past several years, these limits have increased. Additionally, some shopping offers will give you a low credit limit and, over time, increase it as you prove your reliability. With these kinds of cards, it’s not uncommon for users to get from a $400 to a $600 credit limit initially.

However, it also depends on what kind of store we are talking about. Giving out such a small credit limit for a large gadget means that the cardholder won’t be able to buy anything. However, with such a low credit limit, you will need to have a lot of control to ensure that your credit utilization rate doesn’t go over 30%.

Patience, please!

Simply put, merchandise cards require a lot of patience, and you can’t start buying everything you want instantly. On the other hand, if you are buying a lot and reaching the credit limit while paying off your balance on a regular basis, the card issuer might extend your limit prematurely to give you more spending ability.

By proving yourself as a reliable cardholder, you can increase your shopping card limit.

Tips for using your store credit card responsibly

Like with any other credit card, you also need to use your shopping card responsibly. After all, nobody can guarantee complete safety if you aren’t making sure that you are doing everything in your power to protect yourself financially. Here are 5 things you need to do:

Protect your PIN

Your PIN number should be known by you alone. Make sure that you memorize it and don’t share it with anyone. If you have to, write it down somewhere but don’t carry it along with your credit card. This way, if someone gets ahold of your card, they won’t be able to use it because they don’t know the PIN.

Make sure your account number is completely private

There are several ways someone can find out your credit card number. You need to make sure this doesn’t happen by taking the necessary steps:

  • Make sure that your card is always kept private and that nobody sees it in public.
  • Never give anyone your card information on the phone. Do this only when you contact your issuer directly and when you make the call.
  • Don’t answer emails that require personal information or any card information even if it looks like they’re coming from your card issuer.

Make online protection a priority

People are shopping online more than ever, and they can easily get carried away because they are sitting at home in front of their computer and forget about the dangers. This is why it’s essential to make sure that you are protecting all of your information online.

Always make sure that the site you are shopping from is, in fact, the genuine website of the retailer. See if the site is secured and don’t give out any information anywhere unless you know how it will be used in the future. Check out all the policies involving shipping, returns, refunds, and payments.

Protect your passwords

First of all, make sure that you set up a complex password that is at least 9 characters long. To make it even more difficult to crack, include both numbers and letters. Create an account with your card only on the official site and don’t use it anywhere else. Make sure that your card account password is unique.

Update all of your information regularly

If you are moving, notify your card issuer. All of the information, including credit card statements, needs to have the right address. Use your cell phone number to sign up for potential fraud alerts and always update your phone number so that nobody can abuse it.

Shopping cards are a security liability like any other credit card and should be used responsibly.


Shopping credit cards have their upsides and downsides, which makes them suited for some people but not for others. You need to recognize whether your shopping and spending habits will fit in well with what a certain merchandise credit card has to offer.

Think about all of the terms and conditions a card offers you before making the final decision because being stuck with a bad card can be a tiresome experience. We hope this post helped you understand what shopping credit cards are and how they work.

Few Featured Shopping Credit Cards