Forget Store Credit Cards: Here's Why Cash Back Cards Are a Better Choice

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Lots of retailers offer their own store credit cards. Costco, Target, Home Depot, Nordstrom, Gap -- those are just some of many examples. Store cards often include an introductory discount, too. When you're about to make a purchase, it's tempting to apply and save some money.

You may want to think twice about that. Most people can get much more value out of cash back credit cards than store credit cards, for a few important reasons.

Store cards usually earn less back and have smaller welcome offers

I mentioned that store cards often start you off with an introductory discount. A common amount is 20% off your first purchase, usually up to a limit, such as $100. Spend $200, and you save $40. That certainly beats most coupons.

That looks good on its own, but not if you compare it to the welcome offers of cash back cards. Several of them offer a $200 bonus if you spend either $500 or $1,000 in the first three months. And you can reach the spend requirement by paying your regular bills. With a discount from a store card, you only get a large discount if you spend a lot on that first purchase.

Many store cards are also only good for earning rewards at the store itself. They may earn bonus points there, but 1 point per $1 everywhere else. Cash back cards have much broader bonus categories. You can find cards that earn bonus cash back on groceries, gas, dining out, and other everyday expenses.

Cash back can save you money every month

One big benefit of cash back is that just about anyone can use it. It's as good as cash. You can redeem it as a statement credit to lower your credit card bill. For example, if you have $50 in cash back and a $300 credit card bill, you could redeem your cash back to bring your bill down to $250. Many cards also let you deposit cash back to your bank account.

The big problem with store rewards is that you can only use them when you shop at that store. Normally, you redeem points for a gift certificate, and then you need to use the gift certificate within a certain time frame. If you don't need to buy anything there, it puts you in a difficult position.

It's worth mentioning that some store cards earn cash back instead of store rewards. Amazon and Costco both offer store cards like this. These are like a mix of a store card and a cash back card. They're a better deal than your typical store card.

Store cards encourage you to shop on a regular basis

Store cards are designed to build customer loyalty and get people to shop more often. You'll earn bonus points when you shop at that store. You'll earn rewards you need to use at that store. And if you turn your rewards into a $10 or $20 gift certificate, that probably won't cover an entire purchase, so you'll still be spending money there when you use it.

To get the most value out of a store card, you need to be a frequent shopper. Unless your store card is with a place where you shop for essentials, such as Costco or Target, it may not be a good idea to shop there too often. It's not in most people's best interest to buy new clothes at Nordstrom or Gap every week. Your store card really isn't saving you money if it's getting you to make purchases you normally wouldn't.

They may be popular, but store credit cards are rarely the best credit card option. There are a few exceptions, to be fair. But before you get a store card, check out some top cash back cards to see if one of those could save you more money.

Alert: highest cash back card we've seen now has 0% intro APR until nearly 2026

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We're firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers. The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Lyle Daly has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon, Costco Wholesale, and Target. The Motley Fool has a disclosure policy.