Store credit cards might score you a discount up front, but you should avoid them for 3 reasons - Business Insider

Store credit cards may sound enticing, but they come with some of the highest APRs.NurPhoto/Contributor/Getty Images

Store credit cards may sound appealing, but for most people they're rarely the best choice.
They generally don't hold a candle to travel credit cards when it comes to earning rewards on your spending.
They also usually lack features like price and purchase protection, and they're likely to come with sky-high interest rates
Look instead to rewards credit cards with high returns for non-bonus-category spend— such as the Chase Freedom Unlimited — or think about how to get creative with your bonus categories
Read more personal finance coverage.

With the busiest retail season of the year upon us, it's more than likely that you'll hear pitches to open up store credit cards between now and the end of the year.

You know the kind I'm talking about: They come at checkout and pledge to shave money off the amount you're spending that day. Depending on the offer, there may also be a promise of future discounts or rewards points-earning opportunities.

It's a prospect that might seem appealing to someone who's dropping a fair bit of cash on holiday shopping, or for ongoing projects like a home renovation that has you visiting the likes of Home Depot on the regular.

But while store credit cards may sound enticing in the moment, they're often a bad idea. Here are a few of the main reasons to say no — and some other strategies to use instead for maximizing your retail purchases.

Why you may want to avoid a store credit card

The rewards don't measure up

Don't get me wrong — I'm not opposed to in-store savings, especially to the tune of a few hundred dollars, which many retail credit cards will offer as a perk for signing up. But compare those savings to the value you'll get from, say, a rewards credit card sign-up bonus, and it's very clear that you can do better.

Unlike with store credit cards, which normally only shave a few hundred dollars of your purchase total when you sign up, it's pretty common for travel credit cards to offer sign-up bonuses worth more than $1,000. Take the Hilton Honors Aspire Card from American Express, which is currently offering 150,000 Honors points when you spend $4,000 in purchases on your card within the first three months of card ownership. With 95,000 of those points, you can book an overwater villa at the Conrad Maldives Rangali Island that can easily go for more than $1,000 per night—and you'll still have 55,000 points to spare, enough to book another night at a mid-range Hilton property.

Factor the free weekend night certificate that comes yearly with the card into the equation — which can get you another $1,000-plus room at the Conrad Maldives — and you'll really put the store credit card's offer to shame.

And it's not just about the initial bonus you'll get for opening the card. Store credit cards tend to reward you for shopping at that particular store, and not necessarily anywhere else. Rewards cards, meanwhile, will generally offer you at least one point per dollar no matter what you're buying.

They come with sky-high interest rates

The most responsible way to use credit cards is to pay them off every month. Those who don't may be in for a rude awakening if they've switched over from a travel credit card to a store card.

The average APR for retail store credit cards is 26.01, according to an October report from CreditCards.com. That's a far cry from the 21.10% that makes up the median APR for all credit cards.

They lack price or purchase protection

While retail credit cards tend to keep their benefits confined to discounts and other store-related offers, travel cards can come with a range of benefits — some of which can come in handy in the retail realm.

Cards including the United Explorer Business Card and the United Club Card offer price protection, which you can use to get reimbursed for the difference if the price on an item drops after you buy it. Of course, you'll want to look into timing restrictions, coverage limits, and exclusions before banking on this benefit.

Then there's credit card purchase protection, which can help protect you if a recently purchased item is lost, damaged or stolen. And depending on what you're buying — and how valuable it is — using a card that counts it among its benefits may be the way to go. The Platinum Card® from American Express and the American Express® Gold Card are just two of many travel cards that offer some sort of purchase protection

Alternatives for maximizing your retail purchases

Find a card with a good non-bonus rate

While retail isn't generally a spending category that will earn you bonus points with a rewards credit card, you can rack up serious points on store purchases by making sure the card you're using for retail purchases has a strong earning rate on non-bonus spend.

The Chase Freedom Unlimited, for example, earns 1.5% cash back on all purchases — instead of the typical 1% or 1 point per dollar that many cards offer for non-bonus spend. And if you have a more premium Chase card, such as the Chase Sapphire Preferred Card or the Chase Sapphire Reserve, you can turn those points into valuable Ultimate Rewards points with a simple, instantaneous transfer.

If you're eligible for a business credit card, you can do even better with the Blue Business® Plus Card from American Express. That card earns 2 Membership Rewards points per dollar spent on everything — including retail — on the first $50,000 in purchases you make each year. For spending above that threshold, it earns 1 point per dollar.

Get creative with your card's bonus categories

Just because your card doesn't have a bonus category for retail doesn't mean you can't score bonus points on the way to making your purchase. Gift cards for most major retailers are easy to find at other stores that might indeed fall under your credit card's bonus umbrella.

Take office supply stores. You can easily pick up gift cards for retailers including Amazon and Bed Bath & Beyond at Staples, for example, and if you have the Ink Business Cash Credit Card, you can earn 5% back on the first $25,000 you spend in combined purchases at office supply stores and on internet, cable, and phone services every account anniversary year.

Rewards work the same as they do on the Chase Freedom Unlimited — if you have a Chase card that earns Ultimate Rewards points, you can effectively earn 5 points per dollar, instead of 5% cash back, on eligible purchases with the Ink Business Cash card. Just like that, you've earned an excellent return on purchases that might not ordinarily net you a bonus.

Not eligible for a business credit card? Gift cards also abound at supermarkets, and several credit cards include US supermarkets as a bonus category. One personal favorite: the Amex Gold card, which earns 4 Membership Rewards points per dollar at US supermarkets (on up to $25,000 spent each year, then 1 point per dollar).

You'll also often find gift cards at drug stores, and while drug stores aren't a common bonus category, the no-annual-fee Chase Freedom — whose bonus categories rotate quarterly throughout the year — generally includes them once per year.

That means for three months, you can use your Freedom to buy retail gift cards at CVS or Walgreens to earn 5% cash back on up to $1,500 in combined purchases when you activate the quarterly bonus category. And like the points from the Chase Freedom Unlimited, the points you'll earn with the Freedom can also be turned into Ultimate Rewards points if you have a separate Chase card that earns them.

Use shopping portals

No matter what type of credit card you have — retail, travel, cash-back or otherwise — if you really want to maximize your retail purchases, you'll want to go through a shopping portal when you buy something online. Shopping portals allow you to earn extra points on each purchase, on top of what you'll earn by using a rewards credit card, just by visiting them before you click through to a specific retailer's website to make an online purchase.

The major US airlines each have their own (as do some hotel chains and banks), and you can consult websites including cashbackmonitor.com to determine which portal will net you the best return.

Disclosure: This post is brought to you by the Personal Finance Insider team. We occasionally highlight financial products and services that can help you make smarter decisions with your money. We do not give investment advice or encourage you to adopt a certain investment strategy. If you take action based on one of our recommendations, we get a small share of the revenue from our commerce partners. This does not influence whether we feature a financial product or service. We operate independently from our advertising sales team.

Business Insider may receive a commission from The Points Guy Affiliate Network, but our reporting and recommendations are always independent and objective.

Please note: While the offers mentioned above are accurate at the time of publication, they're subject to change at any time and may have changed, or may no longer be available.

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